1. you borrow stuff you dont own so you can trade with it, giving a collateral.
2. if your "investmet" is going the wrong way, bank or exchange will liquidate you, selling you assets at the time they are worth what you borrowed, so the lenders dont lose anything, but you lose all.
Thanks Medusa,
Need some clarification on No 2 (or someone else can pls help) :
How Wrong does it go before investment is liquidated? A little wrong movement can't just get your investment liquidated, right?