A hologram is a recording of an interference pattern made by the interaction of two beams of light. In this explanation, the recording is made in the light-sensitive emulsion of a photographic film.
If two stones are dropped into water, waves radiate from the points of impact. Where the two sets of waves meet, the waves appear to pass through each other; however, where a crest of one wave coincides with a crest of the other wave, an extra high crest will form. Similarly, two troughs coinciding will form an extra low trough. A crest and a trough meeting will cancel each other out. Since light travels in waves, two light beams crossing will have similar crests, troughs and level patches, forming light and dark fringes. If a suitable photographic film is inserted where the beams coincide, it can record this fringe pattern.

In holography, one beam (the reference beam) comes directly from the laser, while the other (the object beam) comes from the same laser but impinges on the object, and is distorted by it, before striking the photographic film. What is recorded on the film is the interference pattern produced by the two beams. After development, if the hologram is illuminated by a beam of light from the direction of the reference beam, the object beam is recreated, and the object "appears."

Laser light is used in holography because it has coherence. This means that the waves of light coming from the laser are not only of the same wavelength, but that all the waves are "in step", like soldiers marching together. White light, from the sun or a light bulb, is made up of many different wavelengths, so it is like a group of people walking along, some taking short strides, some longer ones, all out of step, and going in various directions.

Types of Holograms
Transmission holograms are viewed with the light source on the opposite side of the hologram from the viewer, so that the light is transmitted through the hologram. They are viewed with laser light, since white light gives a rainbow "smear."
Reflection holograms are viewed with the light source on the same side as the viewer; the light is reflected off the hologram.
Transfer holograms are made by using a holographic image from a "master" hologram as the object of a second hologram. By using this technique, the object can appear to be behind, in front of, or straddling the plane of the hologram.
Rainbow holograms are transfer transmission holograms where the original "master" hologram has been masked off through a horizontal slit. This reduces the vertical parallax, but enables the hologram to be viewed by white light without causing a rainbow smear. The object appears to change colour as the viewpoint moves vertically.
Multiplex (or Cross) holograms are stereoscopic holograms made by taking a series of photos with the camera tracking past a subject. This series of photos is then transferred to a hologram through vertical slits. The viewer sees a series of stereo pairs as he moves across the hologram.
Animated holograms are made in a similar way but using time-lapse photography, allowing the subject to move between exposures. When the hologram is made from these photos, the subject appears to move as the viewpoint changes.
Pseudo-colour holograms can be made by pre-swelling the photographic emulsion before making the exposure. The amount of pre-swelling determines the colour of the image. By making two or more different exposures with different amounts of pre-swelling, different parts of the image can be recreated in different colours.
Embossed holograms, such as are seen on credit cards, are made by a manufacturing process which uses a metal replica of a master hologram, which can then be used to print the relief pattern onto plastic.