ok here in detail how and why it works:

1. payer and payee agree on a 2-of-2 address and own addresses
2. payer crafts a bond transaction that deposits X to the common address, but sends only the hash (outpoint) of it to payee. payer does not yet broadcast it, hence no risk to him.
3. payee crafts and signs a refund transaction that spends the outpoint back to payee time locked, such that it can not be included into the block chain until that time point. Payee can safely sign since if he does not own any coin with the outpoint.
4. payer verifies that the refund transaction if counter-signed and broadcasted by him would return the bond to him and if so broadcasts the bond transaction. He can safely do so, since if payee would not proceed, but he could get his money back on his own after the timeout.
5. now payer wanst to use some service of payee and crafts and signs a settlement transaction spending the same outpoint that pays him X-delta and delta to payee. The transaction is not yet valid since it needs payee's signature, hence payer can not broadcast it. Payer sends it to Payee.
6. Payee verifies that the settlement transaction has valid signature of payer and that it gives him enough to offer the service. Payee could countersign and broadcast the settlement transaction thereby closing the channel and also invalidating (double spending) the refund transaction.
7. Payer keeps sending new versions of the settlement transaction with increasing deltas while using the service. If delta does not increase sufficiently Payee closes the channel.
8. At close of the channel Payee will counter-sign and broadcast latest version, since that is most favorable to him.
9. Payee will close the channel well before the refund timout to avoid a race of the two alternatives.