A workflow is a component-based process model that can be used to analyze, manipulate, or visualize data. Each component acts as a standalone program with its own inputs, options, and outputs. The inputs to each component can be data or files, and the output of each component is made available after the workflow has been run. A generic workflow might consist of the following steps.
A component is essentially a black box which receives data from other components and carries out an arbitrary task which results in the generation of new data. The newly generated data is then passed to the component's successor. Some common component types could be analyses, imports, transformations, and visualizations.
Every component has a set of required inputs and user-defined options. The contstraints on inputs and options are defined in each component's XML schema defition (XSD). The XSD file defines the structure of a component. Each component is then defined by it's XSD and run-time program. XML is used by the components to communicate with one another.
Checkout these "How-To" videos, created by some of the early users of the workflow tool.