The idea is pretty simple. Instead of piping the audio output of the radio signal to speakers, it's sent to a computer (with some intervening hardware) where the digital signals are decoded and displayed by software. The computer's sound card generates audio tones that are sent to the radio for broadcasting and for other computers to decode. Everything is handled through the computer and software (fldigi in this case) using pre-programmed F-key macros (manual typing works too) except for changing radio frequencies (with the right set-up, even that can be done on the computer). Pretty neat stuff.
There were three of us rookies around and we all got to play digital RTTY (radio teletype) radio, sending out calls, responding to other operators and learning how to use the software. I think we made a total of 6 contacts, which isn't huge but there might have been some power and/or antenna problems. It was still a good learning experience.
Another member set up a battery powered radio with a 40m dipole antenna and demonstrated sending emails over the radio via Winlink, another pretty cool amateur radio service. Find a reachable Winlink server to broadcast to, compose your message and the software sends the appropriate signals to the radio (via intervening modem) to the listening server, which in turn sends out the emails over the Internet. You can also download any received emails stored up for you. Using this method, even if you're out of power, have no other form of internet access, or are in some other kind of emergency communication mode, you can still send out emails to other people as long as you can reach a server with your radio. Pretty awesome stuff. The data rate is pretty slow, but you can still get communications out.
It was a fun three hours we spent playing radio, and a good introduction to digital radio. Makes me want to do more