As the energy from the sun comes to us, light in the form of photons, and heat radiation is either scattered, reflected, transmitted, or absorbed. Part of this energy is absorbed by the earth's atmosphere and about 35 percent is reflected back into space. Parts of the energy spectrum that are blocked from us are very harmful like ultra violet (UV). Fortunately, almost all UV light is blocked by our atmosphere. The way in which the sun's energy reacts with materials is integral to the way in which electricity is produced via photovoltaic panels and solar thermal.
Photovoltaic cells are designed with a positive and a negative field and as photons are absorbed by silicon it frees electrons through the bottom of the cell and then through wires as electricity. This is DC power and to be used in your home it must be converted into AC through an inverter.
How does solar energy work? Check out this short video for more.
With Solar Thermal, the sun's energy is used to either heat water for your home, or on a larger scale, heat the oil used in the massive Solar Power Towers (see image below) that then heat water to very high temperatures to produce steam to power turbines.These Solar Plants can produce enough electricity to power tens of thousands of homes and businesses.
Solar thermal for your home is a great way to save money on your water heating bills. Even if you do not live in an area with alot of direct sunlight, solar water heating systems can produce plenty of hot water for just about any sized home.
The great thing about solar energy is that it wont run out for billions of years. It is clean it is safe and the applications run from the very small, like watches and calculators, all the way up to huge Solar Generating Towers. It can also be used in remote areas where traditional power sources are not available. In poorer nations solar power is a terrific way for people to get cheap energy for refrigeration and cooking and indoor lighting.
By the way, please check out Solar-Aid.org a great organization trying to help spread solar power to places that can really use it.