Yeast is a living organism. The small single-celled fungi, known as Saccharomyces cerevisiae, grow by budding and multiplying when in a moist environment that contains food. As it grows, the sugar it uses as fuel is fermented, producing carbon dioxide, which makes the bread rise, and other compounds which give bread its characteristic flavor.
There are two kinds of yeast used in baking: dry active yeast is usually packaged in foil strips; and fresh, or compressed, yeast is pressed into a moist block. Either can be substituted for the other; fresh yeast is much more perishable and more difficult to find, but the bread it makes is superb.
To use yeast, it must be dissolved in warm water or another liquid along with some sugar or flour. The water should be 110 to 115 degrees Fahrenheit. Any warmer, and the heat may kill the yeast. Any cooler, and the yeast won't reproduce quickly enough, so your bread will be flat. Use a thermometer to make sure the liquid is at the correct temperature and you'll always have success.
Follow the mixing, kneading, and rising instructions in the recipe carefully. Breads will rise quite nicely at room temperature. If your house is cold, you can put the loaves into an unheated oven to rise. For gas stoves, the pilot light will provide perfect heat. For electric stoves, turn on the oven light for a bit of warming.
Don't be afraid of yeast. If you provide the proper environment, it will perform its magic all on its own. Try making French Bread and discover the joys of baking!