Simply speaking, a colored plastic powder is applied to the parts with an airgun. The parts are then heated until the powder melts and forms a smooth (up to high glossy) surface. Once cooled down, you have a nice, hard coating.
The powder may also be a thermosetting polymer, i.e. it does not only melt above a certain temperature, but also cures. When heating the parts again, the coating doesn't melt any more and stays solid.
The powder is electrically charged by the airgun, and a high voltage is applied between airgun and parts. This makes most of the powder fly to the parts and stick at their surface, and only little waste on the floor. Even the wasted powder can be recycled.
Only metal can be coated by powder coating, and the preparation includes careful removal of any corrosion by sand blasting. For aluminum / alloy, glass bead blasting is better since sand give a too rough surface. Sometimes, chemical treatment is used to increase corrosion protection and / or adhesion of the coating.
The benefit of powder coating is that it's really fast and cheap, needs just one layer (no primer, filler, color, finish), builds rather thick layers (>100µm), can fill small scratchs, withstands most chemicals and is mechanically more resistant than most other colors.
Since powder coating is really, really cheap, while the equipment is expensive, I would recommend to find a company to do this for you.
For example, I got both alloy rims of my scooter coated for 10-20€, when I brought them blasted, which cost another 10-20€.
By the way, wikipedia also has a large article about powder coating!