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To move money in Bitcoin all you need is a valid digital signature. Smart contracts are programs that can check some conditions and then based on those decide to sign a Bitcoin (or Litecoin, Nextcoin, Ripple, etc) transaction or not based on those.
For a simpler introduction to smart contracts and Codius check out: http://bit.ly/codiussimple
Keep the questions coming!
Codius allows you to select oracles based on whatever criteria you like -- including using mining. The nodes don't necessarily need to be reputable, you just need them not to collude