Search in google for phishing to find loads of sites that explain it. One here
http://en.wikipedia.org/wiki/Phishing
One example of how these scammers work is as follows.
They send out hundreds of e-mails pretending they are from a bank (NatWest, Abbey, Barclays etc).
They say you need to verify your online banking details.
Included in the e-mail is a link to a web site that seems to be for the bank in question.
You click on the link and are taken to this web site. It is in fact a "dummy" site that pretends to be the site for your bank but in fact was set up by the scammers.
You type in your userid and password to "verify" them, but of course as it is a dummy site the scammers just take your details after you have typed them in.
Then they go to the REAL bank site and logon with your userid and password, and transfer all the money from your account to their account.
If you ever get an e-mail from ANYBODY asking you to verify your details then ignore it. This could be ebay, paypal, amazon, a bank, credit card company, and so on.
NEVER go to the site they link you to and NEVER type in your userid and password.