A Real Estate Investment Trust (pronounced "reet") works by grouping investors together for a single purpose; developing and managing property. REITs can be done in many different ways. However, the goal is usually the same: increasing the property's value over time, so everyone wins.
Take an undeveloped piece of land as an example. You buy a piece of farmland for $1,000,000. You invest by adding infrastructures such as power, water, and gas lines. You then build apartments on the land and rent to local workers. You have substantially increased the value of that land, and you create sustainable income from the rents received. The total expense may be $10,000,000 for the project.
We break this into 4000 shares (called "units"). Each share is worth $2500 at the start. When the project is complete, and the units begin renting, the property's value goes up. Each investor's share does so as well. The investors also earn a large portion of the rental income, as required by the Securities and Exchange Commission.
The average REIT will produce a long-term 6-8% or higher annual return on investment (ROI). This is done by investing and maintaining real estate that performs.