I think the Binary Replication Tutorial page on the wiki basically explains everything. Unfortunately the actual pg manual is still about as clear as mud even though I now have a vague idea of how this all works. I think this is worth mentioning given the majority of the pg manual is actually of an unusually high standard - probably among the best technical manuals I have read in terms of being both comprehensive and concise, so it's a shame that this section doesn't meet that standard (IMO). Hopefully this will get a rewrite at some point!
cheers,
Ben