I Have A Question About Media Streaming

Please pardon my ignorance but I am not at all clear on the concept. I understand playing a media file from the network, you simply navigate to it, double click and it plays with whatever program is associated with the format. I also understand that there are programs that add a pretty face to this process such as xmbc and plex. But what exactly is "streaming" and how does it differ from the above process?

 Thank you