Physical Computing Arduino

After much trouble and a lot of not understanding I finally set up the breadboard and the arduino and got it all working. Todd helped me set it on a piece of wood and now I understand that this set up can stay this way and be used for other things. I was able to get the code into the arduino program and make the switch turn on and the leds blink. I then connected the potentiometer but don't really know what is supposed to happen with that.
This is about the most confusing stuff I have ever tired to understand.