Quote from: shamntalk on February 24, 2013, 09:19:34 PM

Thank you guys (and gals!) for the help! Here's my first newbie question.

How do the exchanges work?
I understand the way bitcoin operates, but I don't see how exchanges are able to convert $ or pounds to bitcoins.
Can someone please explain their operations?

Simple. They take your bitcoins, they say "abracadabra" and bang, they are turned into dollars, euros or whatever.

More seriously though, they maintain an exchange market. They have a book where they write down orders from their clients to buy or sell bitcoins, and when two orders match, they execute them. It's not rocket science, really.