Asking is not ignorant; it's simply requesting information. And I'm happy to respond. When you have a new and/or original idea, you can patent it. A patent is a declarion of what your idea is, how it works, and what problems it may solve. You then explain in legal terms (generally, in as vague terms as possible, to thereby have the broadest possible interpretation) how your idea works. The Patent Office studies your patent, and if it is original, or a non-obvious extension to an existing patent; will issue you a patent. If someone else figures out your idea, so what. You now OWN that idea for a period of 7 years (with possible extensions). The gov'ts goal is to protect the inventor, so he may capitolize off an idea. Anyone who uses your idea must do so with your permission, or risk legal infringement and levies. Usually, the court will issue a 'Cease and desist' order; which means that MS will be prohibited from continuing to use the idea from that day forward. As Media Player is a revenue stream for Microsoft, it would be in Microsoft's best interest to work out an 'arrangement'.
As the patent holder, especially if you get a cease and desist order, you can name your own price. You could say "Bill, I want $39 Kazillion, billion dollars paid to me in the form of 1987 nickles.
The idea is to arrange your royalties such that Micorsoft decides it's easier to write a check instead of changing your idea such that they can patent it themselves.
For example, if I patent a tri-cycle; you could patent a bi-cycle. The ideas are similar, but the bicycle is not an obvious extension of a tricycle. If you made your tricycle blue, and mine was red; otherwise they were identical, the change is not patentable. This gets rather abstract quickly. The idea is that if you patent something, and I can improve upon your idea, I can patent it too.
In theory, that is. In practice, patents have been issued for stuff like "selling products over the Internet".