From what I can work out they have different levels of risk that offer a differing level of return.
The site rate the people and you invest x amount with zopa and they will spread your money around to offset as much risk as possible.
It seemed that people who can't get credit elsewhere and are more likely to default and become in the higher risk category.
I also think there is a fededback system like
ebay for people that have taken loans in the past.
Your money is not loaned out to one individual but to several at a time.