A diode is created by placing P-type semiconducting material next to N-type material with a small depletion region or junction in between. The side of the diode containing the P-type material is called the anode. The side containing the N-type material is called the cathode. Because a diode is made up of two layers with a junction, it is called a single-junction device.
To understand how a diode works, examine what happens when a voltage is applied to it. If the polarity is such that the positive side of the voltage source is attached to the anode (the P-type material side), the free hole charges in the P-type material will be repelled and move away from the positive potential and in the direction of the junction.
Likewise, the free negative charges in the cathode (N-type material side) will be repelled by the negative potential of the voltage source and also move towards the junction. With both free positive-charge and negative-charge carriers moving towards the junction, the junction is effectively closed allowing current flow across the diode like a closed switch. When the voltage is applied in this direction, the diode is considered to be forward biased.
A forward-biased diode does not immediately allow current to flow. The diode's forward-threshold voltage must be exceeded before conduction occurs. This minimum voltage is enough to free the charge carriers and begin moving them through the junction. For a silicon diode, the threshold voltage is about 0.7 volts. For germanium diodes, it is about 0.3 or 0.4 volts.
Now consider what happens when the voltage is applied in reverse. The positive terminal is attached to the cathode where the positive polarity attracts the free negative charges away from the junction. Similarly, the negative terminal is attached to the anode causing the negative polarity to attract the free hole charges away from the junction. With few or no charges in the area around the junction, it acts like a gap or open switch and no current flows. In this configuration, the diode is said to be reverse biased.
Diodes have maximum forward current ratings that specify the amount of current the diode will handle before failing. It's usually specified by maximum continuous current or by peak forward surge current.
Another important rating is a diode's reverse-breakdown voltage which specifies exactly what it seems – the maximum voltage a reverse-biased diode can handle before being destroyed.
As you have seen, depending upon the polarity of the voltage, a diode can either allow or prevent current flow through it. This is called rectification and a diode is also called a rectifier. Diodes are often used to convert AC into DC.