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Can someone explain how a cap and trade system works, and why it is a good system?

I'll give it a shot:

• The government first sells licenses (yay--more "revenue" to fund bigger government! /s)
• The government then sets up a major bureaucracy to administer such trading scheme.
• The govenrment then sets up a slew of regulations and hires a slew of regulators to monitor, penalize, and enforce said regulations.
• After buying their license (allowing it to exist and produce), U.S. businesses are given a MANDATORY cap, based on junk science, as to how much "greenhouse gas" they are permitted to emit.
• If they find themselves unable to operate under said emission limit, they will be required to purchase a "carbon credit" from a non-emitter or pay a penalty.
• Most businesses involved in the scheme fall into two categories categories 1) those trying to actually produce something useful (the emitters) or 2) those who have been gaming the system collecting assets that qualify for "carbon credits." Many of these assets are not in the U.S.--it could be a otherwise-useless piece of land in some third-world country that they promise not to develop.
• Carbon "markets" (similar to a NYSE) are established to facilitate the trading of "carbon credits." The Chicago Climate Exchange has been established to do this already, created by Michael Milken cohort Richard Sandor who has been helping the Al Gore's and John McCain's of the world push this scam in the United States. These exchanges will create jobs for "traders" -- the traders and exchanges raking in trillions for doing nothing more than buying and selling hot air.
• U.S. businesses will now be asked to compete in a global market which they will be unable to do. They will pay extoriton money (buying carbon credits) making domestic products more expensive until it becomes obvious they can no longer be competitive. The U.S. economy will suffer and consumers, having trouble paying for the very basics, will be buying products from third-world hell-holes who aren't subject to the same strict greenhouse gas limits.
• Bottom line: This is the greatest wealth-distribution scheme ever conceived.

I'm sure I forgot something.