Do you remember the shell game? The principal was quite simple; there is an object and three cups.  The owner of the game places the object under one of the three cups and then moves them around in what seems to be very unpredictable pattern.  The player has to watch the cup with the object and then find it when the owner stops moving them around.  Well these street games are not always fair, sometimes the owner cheats and removes the object or hides it through some sleight of hand.  But the principal of the game is about confusing the people watching, very similar to the way ciphers are used today to protect information. 

Claude Shannon in his paper Communication Theory of Secrecy Systems published in 1949 outlined the principals that still govern the general design of encryption systems today, confusion and diffusion.  In Shannon’s paper confusion is the process of making deciphering the ciphertext as difficult as possible unless you have the key.  The process involved replacing each character with a representing character or symbol from a lookup table.  Quite often the lookup tables would be quite elaborate not only taking into account the original character but also the neighboring characters and a host of other variables.  The diffusion would represent the next layer of protection, the redundancy of rearranging the characters and then running the ciphertext (the resulting text after the confusion layer) back through the lookup table a second or third time.  The result was a complex spider web of non-linear links and mathematical substitutions that is nearly impossible to backward engineer without the key. 

Mr. Shannon outlined the basic principals used by banks, government organizations, and little remote support tools like ScreenConnect to encrypt and protect information.  To learn more about Communication Theory of Secrecy Systems or Claude Shannon visit Wikipedia.org which provides a good overview of both and has links to other supporting sites.