Maggie Koerth-Baker has written a really nice primer on the peer-review process over on Boing Boing. She begins:
Who are these "peers" that do the reviewing? What, precisely, do they review? Does a peer-reviewed paper always deserve respect, and how much trust should we place in the process of peer review, itself? If you don't have a degree in the sciences, and you aren't particularly well-versed in self-taught science Inside Baseball, there's really no reason why you should know the answers to all those questions. You can't be an expert in everything, and this isn't something that's explicitly taught in most high schools or basic level college science courses. And yet, I and the rest of the science media continue to reference "peer review" like all our readers know exactly what we're talking about.
I think it's high time to rectify that mistake.
If you'd like to know what the process is, or how it works, her entry is a good place to start.