BizTalk is an Enterprise Application Integration (EAI) tool. It can be used to integrate applications running within an organization or outside the organization. Typical example for the first scenario would be integrating a SAP application with a purchase order application. A B2B application is a good example for the second scenario where applications from different organizations are integrated.
BizTalk works based on the content-based publish/subscribe architecture. Within BizTalk, the communication is using xml.
How it works at a high level
BizTalk receives the data using the receive port/adapter and uses one of protocols - file, http, soap etc to communicate with the external application. Once the data is received by the adapter, it passes through the receive pipeline (series of components), gets converted into xml messages and is stored in the SQL Server database. If there any business processes or business rules that needs to be performed, it is done in orchestration as shown below. Once the orchestration is done, the message is written back to the database; from here it is picked up by the send pipeline/adapters depending on the subscriptions. The send adapter converts the xml message into a format which is understood by the target application.
Will post more articles as I progress with Biztalk.