Conculsion
This is admittedly a very simple explanation. Two of the more powerful things that .htaccess can do is rewrite URLs and password protect directories. But, I am going to stop here and leave those for later; as they both have the potential to be very long articles on their own.
For More Information
For more information, please check the following sites:
FreeWebMasterHelp.com – This is the site I found that finally explained all this to me in a way that made sense.
Apache.org – Horse’s mouth, as it were.