I will attempt to add some nuance.

In all financial markets there is typically a spot market, the spot market is the market you go too if you want to buy something immediately, so if you want to buy a share of microsoft off the dow your essentially buying it off the spot dow market. This is fairly straight forward for things like stocks but what about oil? Say you know that in three months time you will need 100 barrels of oil, but you don't need it now, if you buy it now you've got to store it till you need it, bit of a waste of money that since it's going to cost you to store it. Well instead of going to the spot market and getting the oil immediately you buy on the futures market, which basically allows you to buy oil in the future but pay the price which is quoted now. When you actually come to get your oil in three months time the price on the spot market could be alot lower than what you paid three months ago, alternately it could be alot higher, it doesn't really matter, you locked in your price for good or ill three months ago.

Another important aspect of derivatives is that usually you can go short. That means you can sell something before you own it. How the hell does that work you ask? Well what your essentially doing is making a deal with your broker, your broker will lend you 100 barrels of oil and you'll sell them, BUT you have to buy them back later and return those 100 barrels to the broker, so if you borrow then sell and the price goes down, you can buy them back later, return them to the broker and pocket the difference, exactly the same as buying, waiting for the price to rise and selling but in reverse.

The third important thing to know about derivatives is that although they can be used to buy the physical item, be it oil or a share of microsoft you don't always have to take delivery of that item you could opt to take the cash value instead essentially betting on the price of the underlying commodity.

Finally, there are generally two classes of derivatives, those that are on an exchange and those that aren't. Futures are a good example of a derivative that are on an exchange, a single regulated place where buyers and sellers can come to deal with each other. The participants both buyers and sellers have to have a certain amount of cash in reserves to support their trading and all that is mandated by the exchange, this helps build trust between participants.

The other type of derivatives are called OTC or over the counter derivatives, these are basically just an agreement between two parties, probably in the form of a contract describing the underlying commodity, bet size e.t.c. The banks often made these OTC derivatives between each other and then they made more OTC derivatives with other banks about the derivatives they'd already bet on, multiply this by hundreds of banks and millions of different transactions and you can see where the OTC derivatives market can become a nightmare really fast. And that's essentially what happened and why you keep hearing about derivatives in the news alot.