How does ubercart work?

Ubercart works by using a set of 30 weight ball bearings(it's all ball bearing nowadays), kanuter valves, and a 1.21 gigawatts Flux capaciter. :)

Seriously,

>>I am having some trouble understand what a module like ubercart would actually do. I am trying to build a 'buy it now' or 'order now' function into the website.

Ubercart is meant to provide standard e-commerce features to the Drupal framework. Things like product listing, checkout, payment processing, inventory management, and order fulfillment.

>>Of course the user needs to be registered as an authenticated user to make a purchase so that I have their details.

Ubercart does not require the user to be "registered and authenticated." You can force registration or it will be done automatically at the end of checkout.

>>However I don't understand what ubertcart does
>>- I can understand that it might have a shopping cart service which is fine

>>But how does it actually perform a transaction?

A detailed and complete answer to this question would be pages long, so I will just give a brief overview. Ubercart provides a "cart" for each user based on their session or user account. It allows products to be added / deleted / updated to the cart. Ubercart provides a checkout framework where the user has to fill out information required to fulfill the order. Once the user has successfully completed checkout, Ubercart combines the products in the cart and the information provided in checkout to create an order which is viewable by the site admin. Ubercart then allows for fulfillment steps including payment processing, shipping etc. . to be done manually by the site admin or automated via a workflow process.

It sounds to me like you might want an Amazon style "one click" system. Is this correct? This is not exactly what Ubercart was designed for, but Ubercart can do it. I would recommend reading the e-commerce forums at Ubercart.org.
Peace,
-Andy