Can anyone explain what "proof of stake" actually is? My understanding is that it's a virtualized/simulated proof of work system.
In order to decide who gets to be this node, people Stake coins. The probability that you are the chosen node is proportional to the number of coins you have staked. If you are chosen, and you do something against the rules, like double spend coins and try and add this to the next block, then you lose your staked coins.
So instead of rewards being proportional to hashing power, they are proportional to staked coins.
This is still being tested, but it's going pretty well.
AIUI, there isn't consensus today that proof of stake is actually workable.
[edit] The whole idea of each is to make sock-puppeting when voting on the truth unprofitable.
With the first, you need a near majority of the compute power in the network to have people believe your "lie" with the second you need a near majority of the coins in the network to do so.
[edit2]
Imagine that banks don't exist, instead everyone writes down every transaction that happens. Then at the end of the day we all get together in the village square and vote on who has what money. This would make it so that no minority of the village can steal money from anyone else.
We can't do that with bitcoin &c. because how do you prevent one person from just running a billion bitcoin clients and voting all the money to themselves? So instead bitcoin (very roughly speaking) requires you to prove that you have done some work to get to vote on what the ledger looks like. This is proof of work. If instead it were "one dollar, one vote" that would be proof of stake.
Ethereum's version is a bit different: to stake, you have to lock up your ETH for at least four months. Then you have your node start betting your staked ETH on which blocks will be accepted by the network. The blocks which are accepted are the ones that get the most stake-weighted bets.
You start with low-confidence votes that won't lose much when you're wrong, see what everybody else does, and progress to high-confidence votes that pay off better when you're right. There's a little bit of inflation plus transaction fees so it's not a zero-sum game, and it all converges on finalized blocks.
This is somewhat analogous to mining; if there's more than one finalized block available, miners have to pick one to build on, essentially betting their electricity on which block will be accepted by everyone else.
Here's an interesting FAQ: