A peer interview is often conducted by the potential colleagues of the candidate rather than the hiring manager. Peer interviews are used to save the manager time and see if the person would get along with their peers. If there is more than one round of interviews, peer interviews are frequently used in the first round to narrow down the shortlist. Then the hiring manager will interview those who did well in the peer interview.
Peer interviews can also be conducted by other staff in the organization. It could be by someone who has previously held the role or managed someone in that role before. These people would have unique insight into what is required for the position.