In an exercise I found stated that, given a field $K$, $$K[x,y]/(xy-1) \cong K[t,\dfrac{1}{t}],$$
where $K[x,y]$ is the polynomial ring in two variables on $K$ and $( \cdot )$ indicates the generated ideal.

However I'm confused at what is meant by $K[t, t^{-1}]$. Is it a polynomial ring? What kind of algebraic structure it has and what is meant by the isomorphism?