Can someone just explain in "idiots" terms how this works?
Its spreadbetting on financial markets, its the equivalent of buying/selling shares but you don't have to physically buy them (so you make a number of buy and sells very quickly) and your initial outlay only needs to be your stop loss (that is a limit at which point you are guaranteed to back out of the market).
So you can either buy a position or sell a position.
Lets take gold as an example:
You may think gold prices are going down so you may decide to sell gold (you don't physically have to own it). You set the amount you wish to sell at (the amount of money per point).
So for example I couls sell gold at the current rate at £1/point.
Gold is currently at $799 to be cleared in December
You can set a stop loss at $849
Now you sit and wait, if gold goes down in price say to $720 (or at any other value and any other time until december) you can decide to close your position (effectively buy the gold you've sold). So your gain would be $799-720 = £79.
If the price of gold were to go up then you would be losing and you could close out your losses at any point (up until your stop loss). And obviously you would lose the difference in this case.
The benefits are that you would only need to stump up the £50 to cover your stop loss but you would still see the same gains or losses that you would have to do if you went and physically bought the gold. The transactional charges and speed at which you can enter and exit the markets are a lot cheaper and quicker.