How does OnTouch Work?

I've always wonder how the OnTouch Function works in Roblox Lua. Could you write out the script and explain each line of code? Thx.

function OnTouch(hit) -- The start of the function, hit or anything else within those brackets is used for 
-- interacting with the player that activated the function.

-- Code goes in here, for example, hit.Parent.Humanoid.Health = 0

end -- Ends the function

script.Parent.Touched:connect(OnTouch) -- In this example the script is inside a brick that you touch,
-- 'Touched' an action that triggers the function, connect is like connecting to the "function service" -- --- (doesn't exist) and OnTouch is the function your triggering.

FYI, functions only work when they are in the same script as the trigger is in.