When you click on the link, it directs you to the site the person put between the [url]and[/url]'s. If they put www.cheathappens.com, you would go to cheathappens. If they put www.myspace.com, you would go to myspace.com.
Get it?
Here: I will link to Tinypic.com; see if it comes up as Cheathappens.