[Spoorthi]

What is data driven automation?

[sk_kireeti]

Taking input from an external file (external to automation script) to drive the automated test is called "Data Driven Testing/Automation".

This makes easier to change input data without going through code to find where it is used and how it is represented. It helps in easy maintenance of scripts.

Thanks,
Krishna

[sivaprasadt@gmail.com]

How the application performs with multiple sets of data.
you must link the data to the test script which it drives. This is called parameterizing your test. The data is stored in a data table. You can perform these operations manually, or you can use the DataDriver Wizard to parameterize your test and store the data in a data table.

[Dhanyaa]

This is also known as Parameterization in Winrunner

[ashutoshjain]

Data Driven testing approach might include simply picking up data from Data table (perameterization) OR querying a Data base to get a particular data, populate(may or may not) the same in Data table, using the same in script and finally writing down the used parameters in another file, so that it can be tracked back.

Hope it helps