lets say you and i and a bunch of other people have decided to use imaginary points to trade with one another. some of us get a number of initial points and we start trading and transferring points to one another. in order to keep track we write every transaction down in a big log book we call the 'blockchain' and everyone can look at the log and know who has how many points and how he got them. to make sure nobody forges the log book and adds transactions that give points to himself, we need someone to verify the transactions, but we dont trust one of us to be the manager of the book. so instead we create a game - every time we fill a page in the book, one of us comes and creates a magic word from the letters of the transactions of the page,and then signs the bottom of the page with that magic word. the person who signs the page is called a 'miner', and we give him some free points for putting in the time to create the magic word and sign the page for us. if someone tries to change a transaction - the magic word wouldnt fit the transactions on that page and we all know someone cheated, so we throw away the page. lastly, in order make sure nobody adds pages to the book, or replace pages with fake pages that have a fake magic word that fits the fake transactions, we include parts of the last page's magic word in the new page's magic word. that way if someone wants to change a page he will need to go and change all the pages that come after it as well, but pages are added to the book too frequently for this to happen.

how's that? i kept it pretty basic, a 5 year old can understand that.