How Do VPNs Actually Work?

Hi! I’ve been using a VPN for almost a year now, mostly to access geo-blocked sites and to stay safe while torrenting. But honestly, I still don’t completely understand how it works. Like, how does it hide my IP address while still letting me download or stream stuff?

Is my connection really encrypted and anonymous, or is there still a way for someone to track what I’m doing? I’ve heard terms like “secure tunnel” and “encryption,” but I have no idea what they actually mean in practice.

Can anyone explain it in a simple way? I feel like I’m using this thing blindly.