How are ssl certificates verified?

What is the series of steps needed to securely verify a ssl certificate? My (very limited) understanding is that when you visit an https site, the server sends a certificate to the client (the browser) and the browser gets the certificate's issuer information from that certificate, then uses that to contact the issuerer, and somehow compares certificates for validity.

How exactly is this done?
What about the process makes it immune to man-in-the-middle attacks?
What prevents some random person from setting up their own verification service to use in man-in-the-middle attacks, so everything "looks" secure?

Solution

Here is a very simplified explanation:

Your web browser downloads the web server's certificate, which contains the public key of the web server. This certificate is signed with the private key of a trusted certificate authority.
Your web browser comes installed with the public keys of all of the major certificate authorities. It uses this public key to verify that the web server's certificate was indeed signed by the trusted certificate authority.
The certificate contains the domain name and/or ip address of the web server. Your web browser confirms with the certificate authority that the address listed in the certificate is the one to which it has an open connection.
Browser and server calculate a shared symmetric key which is used for the actual data encryption. Since the server identity is verified the client can be sure, that this "key exchange" is done with the right server and not some man in the middle attacker.

Note that the certificate authority (CA) is essential to preventing man-in-the-middle attacks. However, even an unsigned certificate will prevent someone from passively listening in on your encrypted traffic, since they have no way to gain access to your shared symmetric key.