In the last few decades, string theory has emerged as the most promising candidate for a microscopic theory of gravity. And it is infinitely more ambitious than that: it attempts to provide a complete, unified, and consistent description of the fundamental structure of our universe. (For this reason it is sometimes, quite arrogantly, called a 'Theory of Everything').
The essential idea behind string theory is this: all of the different 'fundamental ' particles of the Standard Model are really just different manifestations of one basic object: a string. How can that be? Well, we would ordinarily picture an electron, for instance, as a point with no internal structure. A point cannot do anything but move. But, if string theory is correct, then under an extremely powerful 'microscope' we would realize that the electron is not really a point, but a tiny loop of string. A string can do something aside from moving--- it can oscillate in different ways. If it oscillates a certain way, then from a distance, unable to tell it is really a string, we see an electron. But if it oscillates some other way, well, then we call it a photon, or a quark, or a ... you get the idea. So, if string theory is correct, the entire world is made of strings!
Perhaps the most remarkable thing about string theory is that such a simple idea works--- it is possible to derive (an extension of) the Standard Model (which has been verified experimentally with incredible precision) from a theory of strings. But it should also be said that, to date, there is no direct experimental evidence that string theory itself is the correct description of Nature. This is mostly due to the fact that string theory is still under development. We know bits and pieces of it, but we do not yet see the whole picture, and we are therefore unable to make definite predictions.