This fish was 'discovered' by Douglas Adams. (Who describes it as causing the most vicious and destructive wars in the universe, because people started to really understand everything others said.
At this point in the novel (H2G2), Arthur Dent finds himself in a Vogon spacecraft. Their voices are not exactly music to the human ear.
"You'll need to have this fish in your ear."
"I beg your pardon?" asked Arthur.
Ford (Prefect) was holding up a small glass jar which quite clearly had a small yellow fish wriggling around in it…He gasped in terror at what sounded like a man trying to gargle while fighting off a pack of wolves - From The Hitchhiker's Guide to the Galaxy, by Douglas Adams.
Published by Harmony Books in 1979
Once he had the Babel Fish in his ear, Arthur understood perfectly. The Babel Fish lives on brainwave radiation from every source but its host. It then excretes energy in the form of exactly the correct brainwaves needed by its host to understand what was just said.
The Babel Fish reverses the problem defined by its namesake; the original Tower of Babel (according to the Bible) inspired the Deity to confuse human beings by making them unable to understand each other.
(2) The online "Babelfish" is a service from AltaVista: http://babelfish.altavista.com/ - Babelfish and similar services tend to offer such a low quality that people find their results funny. They can therefore be used as toys, for example translating a text to another language and back; some people try cycles of several languages or iterate to a fixed point or a limit cycle.
It can be a useful translation aid but not if you don't understand the language, so is a bit of an oxymoron.