Most solar installations that you see on homes and businesses are usually comprised of Photovoltaic (PV) Cells. Photovoltaics, as the word implies (photo = light, voltaic = electricity), convert sunlight directly into electricity.
PV cells are made of special materials called semiconductors. A grouping of PV cells electrically connected and grouped into a frame is called a Solar Panel or Solar Module. When sunlight strikes the cells it is absorbed within the semiconductor material and the energy of the absorbed light is transferred to the semiconductor. The energy knocks electrons loose, allowing them to flow freely. PV cells all have one or more electric fields that act to force electrons freed by light absorption to flow in a certain direction. This flow of electrons is a current and we can draw off that current to use externally for homes, businesses and power plants.

Solar panels mounted on the roof or grounds of your property convert sunlight into DC power.
Inverter
This power is sent to a device called an inverter (or power converter), which converts the DC power from the solar panels to AC power, identical to that being sent to you from the utility grid.
Electrical Panel
Power travels from the inverter to your electrical service panel (your breaker box). The power from the electrical panel will be distributed to anything that uses electricity in your home.

Utility Meter
When excess power is produced by the solar, the power will flow into the grid through your electric meter. This will cause your meter to run backwards gaining you a credit with the utility company.
Utility Grid
The utility grid automatically provides electricity when needed - at night and during the day when your demand exceeds your solar production.
Net Metering
Net metering legislation states that the utility company must credit you at retail rates (the same rate they would have charged you). Therefore, customers will be credited peak rates for power fed into the grid during peak hours.