How Does Bitcoin Work?
Bitcoin achieves elimination of intermediaries with the help of its underlying technology, blockchain.
Currently if you have to transfer funds to someone, one of the possible ways is by giving cash or alternatively use a trusted intermediary (example, a bank). Both the mechanisms, whether it be physical cash (with the central bank of the country as the guarantor) or electronic transfer, involve an intermediary (in the later case, a bank or another financial institution). When intermediaries are involved, there are transaction costs.
This cryptographic trust is built into Bitcoin through a wallet, a public key and a private key in the program.
Anyone can create a Bitcoin wallet for free by downloading the Bitcoin program. Each wallet contains a public key and a private key.
The public key is like an address or an account number via which any person can receive Bitcoins.
A private key is like a digital signature via which a person can send Bitcoins. The name suggests that private keys should be only held and known by the owner and public keys can be shared with anyone for receiving Bitcoins. That is where you would have heard in the news about Bitcoins being lost either due to a private key not being accessible or stolen by hackers.