There are generally two types of electoral system in use around the world–first-past-the-post (single-member district) and proporational representation (multi-member district).
As John Cleese explains in this public service announcement, the choice of which electoral system to implement in a democracy can have a dramatic impact on party politics and on the political system in general. The idea behind proportional representation is that the composition of the legislative body is directly representative of the political opinions in the electorate. So if, for example, 3% of the electorate votes for the Polish Beer-Lovers’ Party (PPPP–Polska Partia Przyjaciół Piwa), as happened in the Polish parliamentary elections of 1991, then that party will have 3% of the representatives in the legislative body (which it did).
In first-past-the-post systems, such as the USA, Canada, and the UK, the electorate is divided up into single-member-districts, from which a single representative is elected to represent that seat in the parliament. The winner does not have to win a majority of the vote, only a plurality. Thus, if there are 4 contenders for a particular seat, and three of them each garners 20% of the vote, the fourth candidate, with 40% of the vote, wins the seat, representing that district in parliament. The rest of the votes (the 60% going to non-winning parties) is “wasted” as it is not used to determine representation in parliament. These are the basics, but upon these foundations one can build a myriad of different types of systems, such as the “double-vote” system in Germany.