1. Everything is made of molecules (duh).
2. Molecules are made of atoms (also duh).
3. Atoms are made of electrons, protons, and neutrons (very duh).
4. Electrons, protons, and neutrons can be split in half to create quarks.
5. Quarks are actually made of even smaller pieces, called strings.
Strings are eleven-dimensional (ten dimensions + time) bits of energy that not only make up the above particles but create forces including gravity, electromagnetism, strong nuclear forces, weak nuclear forces, and a few other forces that have not yet been discovered.
Strings are so infitismally small that anyone with an IQ of less that 400 (ie, all humans) is incapable of imagining how small they are. To give you an example, imagine an atom of hydrogen was the size of the solar system. On the same scale, a single string would be the size of small tree.
String theory also includes a bunch of theorys including m-theory, relativity, chaos theory, and a few others that may or may not have been invented by someone who was on LSD at the time (if you've ever seen any Mandelbrot Fractals, you'll know what I mean).
For an explanation that the common man may understand, read "The Elegant Universe" by Brian Greene
String theory escapes this endless loop of going smaller and smaller. String theory states that quarks are made up of tiny vibrating strings. One may ask, "Well if all quarks are made up of tiny vibrating strings, what makes the quarks different?" (As the quarks must obviously be different because there have been dozens of different kinda of particles discovered (you know, alpha , beta , etc)). The answer to this question is that the string vibrate at various frequencies. This additional variable accounts for the many property differences of particles.
Thats the jist of string theory. Now for scientists to make this theory check out mathematically, they had to add 7 extra dimensions (for a grand total of ten) and there are lots of theories out there as to what these ten dimensions are. Some say they are too small for us to observe. If we ever do prove the existence of other dimensions (for example, if we observe matter disappearing (not converting to energy) then we can assume it has left our dimension, we will be much closer to solving the mystery of the universe. But then what about other universes...