Our team was given an assignment to understand RSS, both feeds and aggregators. I think we were confused about the terms "readers" and "aggregators" — they seem to be the same thing. Aggregators allow you to look at your selected feeds. Different aggregators present the information in different ways. I use RSS Popper, which presents short summaries of blog posts as individual emails; the emails can be grouped by feed into different Outlook folders. Bloglines.com presents the summaries "aggregated" on a web page. The various tools (RSS Popper, Bloglines, etc.) examine your subscription list and check those websites for updated feeds.
RSS feeds are XML documents that are published to a web page. RSS stands for Really Simple Syndication; it is a particular XML document format. The feed contains summaries of the various items on the web site. When something new is published, it automatically goes out on the feed. There are a variety of tools that generate RSS feeds.
Here is an article by Robin Good that I found useful on the topic: Intranet 2.0: Collaboration, Self-Publishing And Tools Mash-up New Driving Forces