What is an USB filter driver?

A filter driver

is a Microsoft Windows driver that adds value to peripheral devices or supports a specialized device in the personal computer. It is a driver/program/module that is inserted into the existing driver stack to perform some specific function.

Written either by Microsoft or the vendor of the hardware, any number of filter drivers can be added to Windows. Upper level filter drivers sit above the primary driver for the device (the function driver), while lower level filter drivers sit below the function driver and above the bus driver.

You will find some examples at this driver development page (though, that might be more useful for a Stack Overflow question).

Here is an example at Google Groups about writing a USB filter driver. That thread gives a brief discussion on its limitations. Meanwhile, Stack Overflow question WinUSB application or user-mode driver as a filter driver for USB analysis/sniffer/trending shows a use-case.