When a boat is stationary (when it is anchored, for example) then we only feel 
the "true wind". It is coming from its true direction. When a motor boat is 
moving fast, the wind felt while on it is "the wind of its own speed". A 
sailboat uses a combination of both, and this is called the "apparent wind". The 
telltales will only show the direction of the apparent wind “ this is a very 
important point. It's important, because the direction of the apparent wind will 
change if the strength of the true wind changes.
Have a look at the following vectors (remember that the "movement" is in fact 
the wind created by the boat's movement):

While the true wind stays the same, the movement remains stable, too. But once 
the strength of the true wind increases (let's say because of a gust), the wind 
of the boats own speed remains the same, and the apparent wind will change 
direction. It will blow more astern (from behind). In this situation the boat 
will increase its speed, and the apparent wind will change direction again. When 
the true winds strength will go back to its previous state, the apparent wind 
will change again (will blow more from the front, because once again the wind of 
the boats' own speed remains the same). If you don't realize these mechanics, 
its easy to become annoyed at the wind changing the direction constantly. Once 
you remember that the telltales show only the apparent wind, and that this 
winds direction may change with the strength of the true wind changing, you'll 
then be able to steer your boat in the most advantageous way. In other words, 
you'll use your wind and your sails more efficiently.
Why do you have to know this to understand why we now can sail against the wind? 

      When the wind blows astern, the boat is driven forward by the force of 
      resistance to the wind. Thus, the bigger the sail area, the bigger the 
      resistance, the faster the boat will move. Think about spinnakers “ they 
      are very large sails with a parachute-like shape “ we use them (most 
      often!) when sailing "before the wind". 
      However, when the wind blows from the front, the sails shouldn't offer 
      resistance anymore. They should deflect the (apparent) wind, and this is 
      achieved by making the sail flatter. In this way, the force driving the 
      boat forward is the pressure built up on the windward side (the side of 
      the sail on which the wind blows), and the low pressure formed on the 
      other side of the sail (the leeward side). All this results in suction. 
      (Think about airplanes “ it really is the same idea!) These two pressures 
      form a force that is called "sailing thrust", or a "lift" (it is often 
      said that you're "sailing in the range of lift"). In order that this force 
      can have a full effect the sails must be set in the most advantageous 
      angle to the wind (around 10 to 25 degrees to the wind).

At this point two forces act on the boat: the force of propulsion (parallel to 
the axis of the boat's length), and the transverse force (vertical to the axis 
of the boats length). The former is advantageous “ it propels the boat, the 
latter is disadvantageous “ it causes the boat to make leeway and heeling, thus 
it pushes the boat on its side. Modern boats, however, can make up for this 
force greatly, and they often can reach very high speeds without making leeway 
(the keel/centerboard help), and with very little heeling (especially when the 
crew is helping out by sitting on the windward side.)

 (Courtesy Sailfree.com)