You may have heard the term hash or SHA-256 , but what do they actually mean ?
In order to decide which block of transactions will be entered next to the blockchain some sort of contest is held between the miners. They all get a riddle to solve, but you can’t actually solve this riddle logically – you have to guess the answer.
Imagine that you are a Bitcoin miner, and each time you want to enter your block into the blockchain and get a reward you would be given a combination lock and would need to guess the combination in order to enter your block.
Now let’s say that your computing power or hash/rate is the number of combinations you can guess in a second. So the more computing power you have the faster you’d guess the combination.
Since the Bitcoin network wants to keep the time between blocks created in the blockchain constant, as more miners or computing power are added to the network it will become harder to guess the combination. Just imagine that as more and more people try to guess the combination you will be given locks with more possible combinations.
A hash is just a method used to guess the combination for the lock. It’s used by turning a random large number into a smaller number by taking certain actions. so for example – let’s say that each time you guess the lock’s combination you would randomly pick a large number and take the first, middle and last numbers from it. If this doesn’t work you will randomly pick a different large number and guess again.
Of course the miner’s’ calculations are much more complex but the idea is that you decide on a certain method of action for guessing and execute it until you get the answer.
The SHA-256 or “secure hash algorithm 256”, is just a specific way of hashing.
Source: Ofir Beigel (99Bitcoins)