How It Works
Rainmeter uses the Perfmon.dll file, Windows' native performance monitoring library, to get the basics on your system. But if you were to run the stock Windows monitor (Start menu and run perfmon.msc), then you'll see it's pretty boring. So Rainmeter makes monitoring the activity on your desktop readable and readily available.
It also can use a number of third-party DLLs, ranging from iTunes to Sysfan (which monitors system temperature and fan speeds) to a virtual desktop manager. The list of supported plugins and how to call them from within a Rainmeter skin is available on the Rainmeter site. By and large, I leave that to the experts or the people who write skins.
Sparrow skin available on Deviant Art
Rainmeter supports both 32- and 64-bit Windows, from Windows XP to 7, but the skins go in different locations depending on the OS version. So make sure to read those instructions.
Rainmeter places a raindrop-shaped icon in your system tray, from which you can see what skins are available. If you install a new skin, you'll have to refresh Rainmeter so it sees the new skins. Rainmeter lets you load the skin directly or open the whole directory to edit all of the files.
Skins are just text files. You edit them in Notepad and they tend to vary in quality. Some people write and document their code well, but others do not. Then there's the language barrier. Many non-native English speakers contribute skins and you have to wade through some less than perfect English sometimes, but that's life in a community-driven project.