I'm reading "Javascript: The Good Parts" and am totally baffled by what's really going on here. A more detailed and/or simplified explanation would be greatly appreciated.

// BAD EXAMPLE

// Make a function that assigns event handler functions to an array  of nodes the wrong way.
// When you click on a node, an alert box is supposed to display the ordinal of the node.
// But it always displays the number of nodes instead.

var add_the_handlers = function (nodes) {
    var i;
    for (i = 0; i < nodes.length; i += 1) {
        nodes[i].onclick = function (e) {
            alert(i);
        }
    }
};

// END BAD EXAMPLE

The add_the_handlers function was intended to give each handler a unique number (i). It fails because the handler functions are bound to the variable i, not the value of the variable i at the time the function was made:

// BETTER EXAMPLE

// Make a function that assigns event handler functions to an array of nodes the right way.
// When you click on a node, an alert box will display the ordinal of the node.

var add_the_handlers = function (nodes) {
    var i;
    for (i = 0; i < nodes.length; i += 1) {
        nodes[i].onclick = function (i) {
            return function (e) {
                alert(i);
            };
        }(i);
    }
};

Now, instead of assigning a function to onclick, we define a function and immediately invoke it, passing in i. That function will return an event handler function that is bound to the value of i that was passed in, not to the i defined in add_the_handlers. That returned function is assigned to onclick.