Ah don't worry about that - it confused me when I was an eBay newbie too :)
When you bid, you can place your maximum bid, ie the highest you are willing to go. It's not like a real live auction where you just keep bidding until you give up.
So if something starts at £1, John Smith might think "I really want that item, I'm willing to pay £10 max" and place a bid of £10. However they won't necessarily have to pay that much - if nobody else bids at all, then John only has to pay the starting price of £1.
Then say YOU see the item, and see that the current bid is still £1. You think "ooh that's quite nice" and bid £2. However as John has already placed a higher bid, eBay automatically outbids you on his behalf, and will put the next highest bid (I think they have set intervals depending on the amount, so it would go to £2.20).
So it'd say to you "you've been outbid" and you put £2.40, and again because John has set his maximum to £10, eBay will automatically outbid you at £2.60. If you then give up, John will have to pay £2.60.
It isn't actually that somebody is sitting there pouncing instantly IYSWIM, even though it feels like it.
Does that make sense? :)