An air conditioner works like your sweat. When your sweat leaves your skin it takes the heat from your skin with it: evaporation is a cooling process. If you take a hot shower, or walk around in Washington, DC in August, water vapor (humidity) from the air condenses on your skin, making you hotter: condensation is a heating process. (By the way that water on your iced tea in August is NOT condensation, it's condensate... condensation is a process, condensate is the result.) So, have you ever used that air spray to clean your keyboard? If so you know the can gets really cold. This is what happens in your air conditioner. A refrigerant (a liquid that boils at a low temperature, about 40 degrees F) is under pressure and shot out through a small nozzle into your evaporator. The liquid expands rapidly and absorbs heat, making the air around it cooler. (That's call adiabatic cooling, the same thing that happens to water vapor as it rises in the atmosphere, the pressure is less the higher it gets so it condenses into water at a certain point. No one really knows why it gathers together in clouds, though.) After it absorbs heat from your house it goes outside and goes through a radiator with a fan, then gets compressed into a liquid again and goes back into your house. So AC takes heat from your house and takes it outside. A heat pump is just a system that can reverse the process, down to the limit of the refrigerant"s boiling point. So below an outside temperature of 40 degrees, your system heats up electric coils inside your house to heat it. A heat pump takes heat from outside and brings it inside.
Click on the image above to see a video that explains it on my favorite site: HowStuffWorks.com