re: Buying bonds in laymans terms

Bonds, as you may now, are fixed-income investments. Their income comes in forms of payments in fixed intervals. These payments may come from a variety of sources, detailing the type of bond it is. For instance, companies may issue a bond to raise money for a revenue-generating project. That income would be how the debt would be paid off, i.e. your income. Government bonds, usually tax-free at certain levels, are usually paid with revenue generated by taxes.

With that being said, there are a multitude of bonds out there. Of course, the riskier the bond (chances of it defaulting) will yield a higher interest payment to account for the risk.

You can invest in foreign bonds, municipal bonds (don't have to pay taxes at all on these) or corporate bonds.

You may also want to look at some bond funds that diversify holdings in different types of bonds. It all depends on your financial strategy really and what you are looking return.

Let me know if you have any questions.