There are many different interpretations of this theory and it isn't my intention to look into them on a simple blog post. But being a skeptic by nature I thought I'd look at this subject from a rational mainstream perspective to illustrate how even on a very basic level our thoughts do create our reality.
Lets look at a simple everyday example. You decide one day to bake a cake, you buy the ingredients, you bake the cake, you now have a cake. The cake would not exist had you not had the thought to bake it in the first place, therefore your thought led to the reality of the cake existing. Now lets change that to a bigger thing, you have a thought to quit the job you hate, you find a new job, you now have a new job and your whole career takes a different path. That new path started with your thought and intention to create it.
If you had never had those two thoughts in the first place you would not have a cake and you'd still be stuck in your old job. So we must now accept that, at least on some level, our thoughts create our reality.
When you start to look at the thoughts that build up your belief system, you then start to see what effect those might have had on your life. For example if you believe yourself to be worthless and not worthy of love, you might well settle for a relationship with someone who doesn't treat you very well. You are then living with the reality of that relationship. Your belief has created that reality for you.
So even if you don't want to go with the 'new age' concepts of law of attraction, cosmic ordering, vibrational alignment type stuff you can start to understand that thoughts and beliefs are powerful things. So use them wisely!