Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when conventional monetary policy has become ineffective.
Basically, what they try to do is to print money then release this printed money through bond (debt) buying-back. Whoever owns those bonds will have cash on hand instead of papers. Since people will have cash (lots of it), they will try to spend their money, and in turn to boost the economical activity. However, the drawback is to cause inflation. Hence, you will see gold and oil price will rise dramatically in the next few month. Also, stock market will be stimulated and go higher. However, such an economical activity is NOT a health one. If it is not controlled properly, it can cause serious inflation problem. By that time, price for everything will rise.
If you have trouble to understand this, you can think it as US government is printing money to let people use it. Just like parents give their children unlimited money to spend.
2012-09-16 09:30:28 補充：
Bond is issued by US government to borrow money from other countries or her own people. Therefore, US government can print money to buy those bonds back and return the borrowed money to those bond owners (holders). It means these holders are FORCED to have their money back.
2012-09-16 09:35:11 補充：
Also, because US government will print lots of money, it will de-value the US dollar, it can also artificially reduce the debt value to those countries that hold bonds. It means, say US government owe you $100 before she starts printing money. By the end of QE3, your $100 might only worth $90.
2012-09-17 10:05:06 補充：
"conventional monetary policy" is thing like reducing the interest rate, relaxing the borrowing criteria ... Please note that the conventional way will NOT increase the amount of paper money flowing in the financial market, but QE will !