Bitcoin works by having "blocks" of data, containing transaction history (every Bitcoin transfer someone has made - it is only actually made when incorporated into a block), "mined" by a network. These blocks are mined by incrementing a value in the block of data computing a hash of it, until it falls within a certain range. The fact the hash must be in this range results in Bitcoin miners having to do millions of hash computations until they find the correct one, creating a significant level of difficulty in producing a block. This difficulty means that it is difficult to spend Bitcoins twice, since you would theoretically need to control 50% of the computing power working away at it. Each miner is competing with every other to mine the next block first. Whoever does so can add a "reward" of Bitcoins to the block of transactions, and this is how new Bitcoins are made. Over time, the Bitcoin network increases the difficulty by making the range of valid hashes narrower, so that even as more miners join the network, it will still take roughly 10 minutes until the next block is mined. What's happened in this case is that now the reward, previously 50 BTC, has been halved to 25 BTC. I should note that miners can also deduct transaction fees... anyone who makes a transaction can add a small fee. This adds an additional incentive for miners to mine a block beyond the other reward. It also means, of course, that they prioritise whoever pays the highest fee.
I've long wondered about this, how long does it take to process a transaction if you add no fee? The fee is pretty significant (especially for microtransactions), and I'm not in a hurry, so I can wait a few minutes/hour.
Bitcoin are "mined" by miners across the globe who run special software on their machines/mining rigs. Each time a block was mined before block #210 000 miner earned 50 bitcoins (+transaction fees). Now, it will got only 25 bitcoins. It's part of Bitcoin specification. More reading: https://en.bitcoin.it/wiki/Mining#Reward
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Translation to English from Bitcoinese?
Bitcoin works by having "blocks" of data, containing transaction history (every Bitcoin transfer someone has made - it is only actually made when incorporated into a block), "mined" by a network. These blocks are mined by incrementing a value in the block of data computing a hash of it, until it falls within a certain range. The fact the hash must be in this range results in Bitcoin miners having to do millions of hash computations until they find the correct one, creating a significant level of difficulty in producing a block. This difficulty means that it is difficult to spend Bitcoins twice, since you would theoretically need to control 50% of the computing power working away at it. Each miner is competing with every other to mine the next block first. Whoever does so can add a "reward" of Bitcoins to the block of transactions, and this is how new Bitcoins are made. Over time, the Bitcoin network increases the difficulty by making the range of valid hashes narrower, so that even as more miners join the network, it will still take roughly 10 minutes until the next block is mined. What's happened in this case is that now the reward, previously 50 BTC, has been halved to 25 BTC. I should note that miners can also deduct transaction fees... anyone who makes a transaction can add a small fee. This adds an additional incentive for miners to mine a block beyond the other reward. It also means, of course, that they prioritise whoever pays the highest fee.
I've long wondered about this, how long does it take to process a transaction if you add no fee? The fee is pretty significant (especially for microtransactions), and I'm not in a hurry, so I can wait a few minutes/hour.
TL;DR: What's the wait like if you're stingy?
Most transactions don't need a fee and even those that do will be relayed eventually even with no fee (currently).
See this Stack Exchange answer for some more details: http://bitcoin.stackexchange.com/q/4483/61
Bitcoin are "mined" by miners across the globe who run special software on their machines/mining rigs. Each time a block was mined before block #210 000 miner earned 50 bitcoins (+transaction fees). Now, it will got only 25 bitcoins. It's part of Bitcoin specification. More reading: https://en.bitcoin.it/wiki/Mining#Reward