Like most computer backing store, a CD-ROM is just a huge load of 0s and 1s. The data is read with a laser in a CD-ROM drive. Here is a diagram.


\ \
 \ \   <- laser
  \ \



///\/////\\\\\////\\\\\/////\\\////\\\////\\\///
------------------------------------------------ CD-ROM

The laser iterates over the surface of the CD-ROM, shining on those dashes. They represent little reflective bits on the surface of the CD. The CD-ROM drive has sensors to catch this reflected light. If a certain sensor is activated, it's a 1. Otherwise, it's a 0. Nice and simple - the dashes are just reflecting the laser in the appropriate direction.

The reason CD-ROMs are read-only is because the process of "burning" these reflective surfaces could only take place once on a CD. Now, there are a hundred or so layers of the reflective material on CD-RWs, so one layer can be burnt totally away and a series of data burnt into the next layer. Cool.