For various reasons, people took out adjustable rate mortgages during a housing bubble (price of houses spirals ever upward). Banks took those mortgages, re-packaged them as investment securities, and sold them. Many companies (including banks) bought these securities, and when the housing bubble burst, prices of houses dropped. Peoples mortgage interest rates started to adjust (upward), and many people went into default (stopped paying their mortgage).
The value of these mortgage-based securities started to drop. Businesses holding many of them discovered that they were in very poor financial health now. Lenders didn't want to lend to unhealthy businesses, which made them more unhealthy. Now it's spreading to the healthy businesses..."Credit" is the lifeblood of our economy. Without being able to borrow, even very healthy businesses aren't able to expand their business, or even replace aging machinery. The economy starts slowing down, and people get laid off. Unemployed people have less money to spend on things, so businesses do even worse. Lather, rinse, repeat, and we have a very, very bad recession for everyone in the country.
The bailout bill is offering to buy some of these low-valued mortgage-based securities from businesses that are really in trouble. Once they have those securities off of their ballance sheet (and some cash in hand too), they're able to go about doing whatever they normally do. The credit faucet doesn't turn off, and the economy keeps chugging. Hopefully, in time, these mortgage-backed securities will go back up in value, and let the government slowly sell them back out onto the market, possibly even at a profit.
The bailout bill isn't about rewarding some rich bankers, it's about stopping the rapidly spreading credit "famine" that is threatening to grind our entire economy to a halt.