Can someone explain how the Bitcoin Blockchain works? I'm trying to figure out how the blockchain works and how to read it via blockchain.info website. Is there a laymen way of explaining how the block chain works and how to read the blockchain to trace transactions?

What I know so far is:
the blockchain is just a public ledger of transactions on the bitcoin network.
If you are completely new to Bitcoin, you may find my second answer more accessible, which is a less technical description.



As you said, the blockchain is a log of all transactions that were ever verified on the Bitcoin network.

The transactions are collected in blocks, which are found approximately every ten minutes in a random process called mining. As transactions transfer ownership of Bitcoin balances, each of these blocks represents an update of the user's balances on the network.
By following the blockchain from the Genesis Block and applying all transactions that were validated in each block in the correct order, you arrive at the current status quo.

Each block header contains:

 [Illustration by Matthäus Wander (Wikimedia)]


Timestamp:
The time when the block was found.
Reference to Parent (Prev_Hash):
This is a hash of the previous block header which ties each block to its parent, and therefore by induction to all previous blocks. This chain of references is the eponymic concept for the blockchain.
Merkle Root (Tx_Root):
The Merkle Root is a reduced representation of the set of transactions that is confirmed with this block. The transactions themselves are provided independently forming the body of the block. There must be at least one transaction: The Coinbase. The Coinbase is a special transaction that may create new bitcoins and collects the transactions fees. Other transactions are optional.
Target:
The target corresponds to the difficulty of finding a new block. It is updated every 2016 blocks when the difficulty reset occurs.
Nonce:
An arbitrarily picked number to conveniently add entropy to a block header without rebuilding the Merkle tree.
The block's own hash:
All of the above header items (i.e. all except the transaction data) get hashed into the block hash, which for one is proof that the other parts of the header have not been changed, and then is used as a reference by the succeeding block.


As many miners compete to find the next block, often there will be more than one valid next block discovered. This is resolved as soon as one of the two forks progresses to a greater length, at which any client that receives the newest block knows to discard the shorter fork. These discarded blocks are referred to as extinct blocks (sometimes also referred to as orphaned blocks, although their complete ancestry is known).

When a transaction is submitted to the network, it is passed on peer to peer by all clients. Upon discovery miners will put it on their list of transactions that they want to verify and update the Merkle Root.

On Blockchain.info you can track a transaction either by requesting the page directly with the transaction hash

http://blockchain.info/tx/&lt;transaction-hash&gt;
e.g. http://blockchain.info/tx/37df28642f97db7003a7bc6663467eb1e9cb4493b6c94bf089ee77f87acdae3d


or by calling one of the involved addresses through

http://blockchain.info/address/&lt;address&gt;
e.g. http://blockchain.info/address/1DrZtRNsSu9BqGcY4D9etFno4H95DqNmKb


Either way for each transaction you will see a line with a big arrow that shows you which addresses' were used to fund the transaction and what addresses received which portions of the transaction.