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Hehehe!
Isn't that the worms crawl in and the worms crawl out and the worms make your banana peels into black gold? Something like that?
In layman's terms...sorta.

Actually it's a fascinating microbial process.
*hrm*
You have larger detritivores(insects, fungus, worms) start working on all the huge pieces- peels, eggshells, hunks of this or that and the smaller ones(bacteria and fungi) start on the smaller/smallest stuff. Microorganisms really start to take over and start eating and eating and eating. While they are munching away they're constantly dividing, producing their wastes(which includes helpful bits like nitrates), liberating other elements and compounds into useful forms, and as a result the pile gets very hot...upwards of 140 degrees Farenheit. After this prolonged heating most of the microbes die(at least the harmful ones) thus leaving a sterile and very fertile patch of dirt.
Basically you're contributing to the brown food chain...where the dead things are eaten and their components are freed to be used again in the green food chain.
Or at least that's a very quick and easy to understand overview.

Yay learning!
I could be a teacher...if I had the patience.

~Zoo