How does interpreting a script work?
"Scripting" languages are typically interpreted, not compiled.  That means that there will be a program called the "interpreter" for that language, which reads the programs written in the language, and executes them. You can start reading about interpreters from the Wikepedia entry:

http://en.wikipedia.org/wiki/Interpreter_(computing)

A compiler, on the other hand, translates a program in the programming language into machine language, and lets the CPU execute the machine language program.  The only reason for compiling instead of interpreting is for speed.  The CPU can typically execute the translated machine language program about 10-100 times faster than any interpreter.  The reason is that the CPU is implemented in hardware.  Otherwise, there is nothing that a CPU can do that a program can't.

Interpreted programs runs slow as compared to compiled ones due to the difference in execution process.

Scripting languages are usually used for expressing high-level operations.  For such things, the speed advantage of the CPU becomes much less significant.  So, interpreting them can be competitive to compiling them.