Everyone has heard of "radioactive half-life." Basically if you have 1 kg of unstable particles, half of them will decay after a given amount of time. So after say, a 2.3 years, you might have 0.5 kg of stable particles and 0.5 kg of unstable particles.

So, the decay of macroscopic quantities is easily predicted by an exponential decay function. Now, what happens if we reduce the amount of matter we have from the macroscopic quantity of 1 kg, to a microscopic quantity of say, 10 atoms? now 1 atom? Well, what the decay function now tells us is that after 2.3 years there will be a 50% chance that our single unstable atom has changed to a stable one. That is all it can tell us. Unless we observe it, we will never know when or if it decays. So, until we observe a particle, what we must say is that is in a superposition of being both partially stable and partially unstable. (This brings in several other, interesting points. see: wave/partical duality, double slit experiment)

Well, when all this was first discovered, people were just realizing how weird quantum mechanics is. At people were content to say, "well, all of this weird stuff is just going on in the microscopic world, so it's not that big of a deal." By thinking this they had unconciously drawn an imaginary line between the microscopic and macroscopic world. What Schrodinger did with the cat experiment is say that all the weird stuff going on in the microscopic world could make weird stuff happen in the macroscopic world. And really, there was no difference between the two.

With all of that explained, here is the thought experiment:
First there is a random quantum event, say the decay of an unstable atom, as before. This atom is being monitored by a mechanical device that controls the release of a poisonous gas. If the atom decays, the poisonous gas is released. Now, the entire device is put in a sturdy box with a cat. Therefore, when the particle decays, the gas is released and the cat dies.

Well, as we said before, as soon as we close the box and stop observing the atom, we cannot know if it has decayed. Therefore the atom is in a superposition between stable and unstable. However, since the state of the atom is linked to the life of the cat, the cat must also be in a superposition between alive and dead. When the box is closed the cat enters an superposition. It is neither alive nor dead, somewhere in between. It's life is now described by the same function as the decay of the unstable atom. The thing about a superposition is, you never see it. We can't see an alive-dead cat. Therefore, as soon as it is opened, our observation "breaks down" this superposition, and we see the cat as either alive or dead.