ihr in this sentence means
you (informal, plural).
ihm must be in nominative and the other in dative. Only
ihr can be in nominative, therefore
What Tigaj said, a number of verbs only take a dative object. A list of a number of them can be found here: http://german.about.com/library/verbs/blverb_dativ.htm
Just print this table out really small and stick it to the inside of your eyelids for a month: https://en.wikipedia.org/wiki/German_pronouns#Personal_pronouns
"Sie helfen ihm." is using the polite or formal version (singular and plural) of you. There are many forms of this lesson. If you were translating to German from the English "You are helping him." or "You help him.", then this should also be accepted, as well as "Du hilfst ihm." which is singular familiar form and "Ihr helft ihm." which is the plural familiar form. During the lesson you can scroll your mouse over the verb to see the hover hint definitions and click on the blue conjugation tab to see the different forms of the verb as conjugated with the pronouns. See the tips and notes to see the pronouns in different cases.
Is it just me or are there any other people who still don't get it, even after reading all the comments? I studied Latin once, thought these grammatical cases were difficult. How can you differentiate when no context is given? (and I am not talking about just this sentence). I thought with my Dutch background German is a piece of cake, but I just can't get a grip on this "dative"-devil-in-a-box. It gets me frustrated! I try to understand certain sentences by translating them into Dutch, but sometimes they still don't make sense. For example if I would translate this sentence: ihr helft ihm. Ihm could be translated as "aan hem", which would work in another context. You cannot say "ik help aan hem"! Would it be more "ik bied hulp aan hem?" or I am an idiot trying to translate this in an attempt to understand the difference? Is there a certain trick to know when to use this word order if I am ought to write it by myself? (I hope anyone gets my question!)
"It is helping him" = Es hilft ihm
If anyone is wondering why when you hover over ihr one of the suggestions is "it", it's because the hover hints are linked to a dictionary-like database. And like a dictionary, not all meanings are possible in every sentence. Here's an example where, if you broke it down word for word, ihr could mean "it":
Die Kuh ist verletzt. Ich helfe ihr. = "The cow is injured. I am helping it."
The word "ihr" is never translated to females. It can mean many things. Her, their, you. You know its meaning via context. You can tell it means "you" (plural familiar) because of the verb. Another clue - there are only 3 words in the sentence - the second word is the verb and the third word is in the dative case. So that means the first word must be in the nominative case.
This is a confusing translation because in proper English the plural of "you" is "you." So the translation should be: "You help him." In the southern US states a regional pronunciation is Y'all or perhaps to match this German word "Ihr," a southerner might say, "All y'all. ;-)
I got this one right, but I came here to say this one is really tricky after learning the dative of she "sie" is "ihr." I feel your pain, Freunde! The thing that tipped me off, not being very familiar with the conjugations of Helfen, was there probably wouldn't be 2 dative nouns in the sentence.
I was having a lot of trouble on this lesson, so much so that I was on the verge of quitting, but then I lernt that certain verbs change the case to dative. Learning these verbs is important if you really want to get good at German. I imagine that there are many sources out there on the web that will list dative verbs.