Stephen Walt has an article about conspiracy theories in which he gives the most succinct description of the aims and methods of conspiracy theorizing that I've seen.
Conspiracy theories take many forms, but they generally have several common features. First, they often claim to expose the secret machinations of a small group of individuals, acting to accomplish some nefarious but largely-hidden purpose. Second, they attribute to the designated group vast and far-reaching powers, including a mysterious ability to control (rather than simply influence) a wide array of institutions. Yet a conspiracy theory (as opposed to a careful institutional analysis) never identifies the precise mechanisms by which this alleged control is achieved and normally fails to provide concrete evidence to justify its far-reaching claims. Alternatively, conspiracy theorists sometimes suggest that "the government" is engaged in some enormously-important but covert activity, like hiding captured alien spacecraft at "Area 51" or arranging to bring down the World Trade Center while getting it blamed on al Qaeda. In virtually all cases, a good conspiracy theory implies that what you think you know about the world is dead wrong, usually because the people responsible for the conspiracy have managed to convince you that up is down and black is white.
Please read the whole thing.