A Roth IRA works like this: First you earn wages, then you pay tax on your wages, then you deposit some of your wages into a Roth IRA. Your money grows tax free inside the Roth IRA and after five years and age 59.5 you can withdraw it tax free. In other words, you pay your tax when you earn the money, but not again. If your Roth IRA increases in value, all the increase as well as the original principal can be withdrawn tax free.
A traditional IRA can be converted to a Roth IRA but you must pay taxes on this amount at the time of conversion. There are also slightly different rules for a Roth IRA. For example, you can make contributions to a Roth IRA even after age 70.5 and there are no required withdrawals. Leave it in as long as you live.
There is a wealth of information about IRA’s here: http://www.irs.gov/pub/irs-pdf/p590.pdf