Silica gel is a synthetically produced form of silicon dioxide in the form of hard irregular granules or beads. A microporous structure of interlocking cavities gives a very high surface area making silica gel a high capacity desiccant. Water molecules adhere to the gels surface because it exhibits a lower vapour pressure than the surrounding air. There is no chemical reaction, by-products or side effects produced by silica gel and water vapour is simply absorbed into its internal pores.
You can get silica gel in the form of indicating and non-indicating, the difference being non-indicating gel will remain physically unchanged as a result of moisture absorption whereas indicating silica gel will give a visual indication of the absorption process/level.