http://en.wikipedia.org/wiki/Roth_IRA
Basically, you are just investing in the same stocks and mutual funds that you could trade daily. But, you are telling the government that this is a long-term investment. So they give you a tax break as an incentive.
You invest post-tax dollars and (unless the rules change) you are not taxed at retirement time when you draw from the account.
This is different from a 401K, where you invest pre-tax dollars and you are taxed when you draw.