The players: A room with two slots, an English-speaking non-Chinese-speaking person (John), a large book, a Chinies-speaking person (Dan), and some paper and pens
The room contains John, the book, and some paper and a pen. The slots are for input and output of the sheets of paper. Besides the paper, John and Dan have no means of communication.
John receives the paper with Chinese characters from Dan, uses the instructions in the book, and passes back out a piece of paper with the output indicated in the book.
The book is a set of instructions in English (which John understands). They contain a list of Chinese characters along with English directions indicating how to write a response to each Chinese input.
Dan wants to know if who/whatever is in the room understands Chinese. Dan writes down ideas and questions in Chinese and passes them to John. From Dan's point of view, the activity somewhat resembles the Turing test (if you know what that is), except the object in question is the ability to understand Chinese and think rather than artificial intelligence.
John doesn't understand Chinese. John is the computer running the program (the book) which is a form of artificial intelligence. It seems like the person in the room understands Chinese, but we all know he doesn't. By analogy, a computer running an artifical intelligence program, even if it passes the Turing test, is not really thinking and understanding, just simulating.