Fraser Speirs – Understanding Git Submodules
http://speirs.org/2009/05/11/understanding-git-submodules/

"Git submodules are implemented using two moving parts: the .gitmodules file and a special kind of tree object. These together triangulate a specific revision of a specific repository which is checked out into a specific location in your project."

Fraser Speirs explains the difference between good old svn:externals and git submodules.