An explanation for the coders out there: The have_posts() and the_post() are convenience wrappers around the global $wp_query object, which is where all of the action is. The $wp_query is called in the blog header and fed query arguments coming in through GET and PATH_INFO. The $wp_query takes the arguments and builds and executes a DB query that results in an array of posts. This array is stored in the object and also returned back to the blog header where it is stuffed into the global $posts array (for backward compatibility with old post loops).
Once WordPress has finished loading the blog header and is descending into the template, we arrive at our post Loop. The have_posts() simply calls into $wp_query->have_posts() which checks a loop counter to see if there are any posts left in the post array. And the_post() calls $wp_query->the_post() which advances the loop counter and sets up the global $post variable as well as all of the global post data. Once we have exhausted the loop, have_posts() will return false and we are done.
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