[A:] Excellent question! First we'll have a quick history lesson, then we'll see how it works and how it differs from fiat money.
Definition of the Gold StandardMy normally extensive Economics Glossary does not have an entry on the gold standard, so we'll have to look elsewhere for a definition. An extensive essay on the gold standard on The Encyclopedia of Economics and Liberty defines the gold standard as "a commitment by participating countries to fix the prices of their domestic currencies in terms of a specified amount of gold. National money and other forms of money (bank deposits and notes) were freely converted into gold at the fixed price." A county under the gold standard would set a price for gold, say $100 an ounce and would buy and sell gold at that price. This effectively sets a value for the currency; in our fictional example $1 would be worth 1/100th of an ounce of gold. Other precious metals could be used to set a monetary standard; silver standards were common in the 1800s. A combination of the gold and silver standard is known as bimetallism.
A Very Brief History of the Gold StandardIf you would like to learn about the history of money in detail, there is an excellent site called A Comparative Chronology of Money which details the important places and dates in monetary history. During most of the 1800s the United States was had a bimetallic system of money, however it was essentially on a gold standard as very little silver was traded. A true gold standard came to fruition in 1900 with the passage of the Gold Standard Act. The gold standard effectively came to an end in 1933 when President Franklin D. Roosevelt outlawed private gold ownership (except for the purposes of jewelery). The Bretton Woods System, enacted in 1946 created a system of fixed exchange rates that allowed governments to sell their gold to the United States treasury at the price of $35/ounce. "The Bretton Woods system ended on August 15, 1971, when President Richard Nixon ended trading of gold at the fixed price of $35/ounce. At that point for the first time in history, formal links between the major world currencies and real commodities were severed". The gold standard has not been used in any major economy since that time.