People keep saying it's complicated. In this slideshow (pdf), though, Paul Krugman does an excellent job simplifying:
All I'd add is that the bailout plan fixes only the final line. It injects adequate financial capital into the system to head off a credit contraction. But the housing bust is not over, and the mortgage losses have not finished. We've got a problem, but the bailout plan is, at best, only half the solution.
All I'd add is that the bailout plan fixes only the final line. It injects adequate financial capital into the system to head off a credit contraction. But the housing bust is not over, and the mortgage losses have not finished. We've got a problem, but the bailout plan is, at best, only half the solution. 
