re: SLV

This is my understanding. Anyone who knows more than me feel free to correct me.

Selling a call:
I sell you a contract (1 contract = 100 shares) to buy Shares of Company X at $Y (strike price) by a certain date for $Z per share (premium).

So let's do an example.

I sell Lsut81 1 contract SLV for $20 per share by December, 21, 2013 for $.10/share.

You would give me $10 (.10 x 100) for the premium. On or before December 21, 2013 you would have the option of buying 100 shares of SLV for $2000 ($20 x 100) from me.

So how does this benefit you? Well, if shares of SLV are trading for $25 on December 20, 2013, you'd make a profit of $490 ($2500 - $10 - $2000) if your turned around and sold the shares.

If the price stays below $20, it doesn't make much sense for you to buy at $20 and you'd just let the contract expire. In that scenario I just made $10 from the premium.

A covered call means you actual own the underlying asset.

ETA: Russian beat me to it and seems to have made a more concise explanation.