This is a guide to explain what goes on inside your computer, as I examine each part separately and explain simply what it does.
The Case

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Well, first things first. The case is just what it says on the tin - a case for your computer. Everything is held in the case, with CD/DVD/Floppy drives having special slots at the front. At the back there are holes for a number of sockets and plugs for things such as a keyboard, mouse, speakers, printers, etc.
Peripherals

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'Peripherals' is the collective name for anything that plugs into the back of your computer - such as keyboards, mice, scanners, printers, speakers, pen drives, etc.. There are thousands of variants and accessories available, so we won't go into much more detail here.
PSU

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This stands for Power Supply Unit. Again, its function is fairly simple - it supplies power to all the bits in your computer, including the fans in the case (your computer needs to stay cool!).
The Motherboard

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This is the mother of all circuit boards inside your computer. Everything connects to this board - it is the central unit, the board that connects different "bits" to each other. You can guarantee that anything in your computer is connected to the motherboard in one way or another.
CPU / Processor

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CPU stands for Central Processing Unit. Don't get scared by this scary title however, as this little board's job is fairly simple. It is the "brain" of your computer. It makes all the important decisions and controls the other parts of the computer.
You may have come across the terms "dual core" or "quad core" before, when talking about computers. This simply means that there are multiple CPU's - dual core means 2 processors, and quad core means 4 processors - as they say, 2 minds are better than one!
RAM

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This is also another term you may have come across when talking / looking at computers. RAM stands for Random Access Memory. You often get several of these boards in your computer, giving a total amount of "memory". This memory is measured in Gigabytes, and generally the more memory the better.
You might like to think of RAM as the heart of your computer - the stronger the memory, the more strenuous tasks your computer can do. However, do something your RAM can't handle and your computer will freeze, or have "a heart attack".
Hard Drive

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The hard drive is basically a high-quality CD inside your computer that stores all of your data. They come in various colours, sizes and styles, but they all perform the same job: to store your documents, music, movies, pictures, settings, and anything else you might have saved on your computer.
Graphics Card

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This is the bit of your computer that acts as a "translator" between your screen and the guts of your computer. It converts the signals coming from the other boards in your computer into visual data that the monitor can display. People who use their computers for playing fancy games often have expensive graphics cards that "translate" the data faster, more efficiently and more accurately.
Optical Drive

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You may be thinking “Optical Drive? What's that? I haven't got one of those”. However, stand corrected. "Optical Drive" is the proper term for CD/DVD drive. Every modern computer has one of these now, as practically all software and media is available on disks. Again, as with other parts of a computer, there are many variants available - some being able to write DVD's as well as read them, some being able to read these "new-fangled blu-ray disks".
Sound Card

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Most motherboards come with built-in sound cards nowadays. However for those that don't, or for the more advanced users, you may need a sound card. These perform roughly the same job as a graphics card, except instead of converting signals into visual data they convert them into audio data that can be played through your computers system. Again, there are many different types of sound card available, with the more expensive ones offering high quality surround sound and many other features us average users will never use.
And there you go! That's all there is to an average computer! However, as technology is so rapidly advancing, there are always many other add-ons you can buy for your computer that I probably haven't listed here. Boards such as TV tuners, wireless networking cards, Bluetooth cards, and many are available to just slot into your motherboard. These all perform the functions they say on the tin - so I will not go into detail here. I hope you found this article interesting, and if anything learned something new about your computer!