I have explained how a junction diode works before, but it appears that a lot of folks don't still don't understand it. First and foremost, a junction diode is a
diffusion device. It works on the same principle that a drop of ink diffuses throughout a glass of water. When the diode is first manufactured, its P and N type material are bonded together. The electrons from the N-side and the holes from the P-side diffuse into each other's territory and annihilate each other to form a boundary region free of of charge carriers called a "depletion region". When the immobile N-type material on the boundary lose their electrons and become positive ions, and the immobile P-type material on the boundary lose their holes and become negative ions, an equilibrium is reached because the positive ions on the N-side oppose further diffusion of the holes and the negative ions on the P-side oppose further diffusion of the electrons. This gathering of opposite charges cause a barrier voltage. The diode is packaged and shipped in this equilibrium condition.
When inserted into a circuit, a forward bias voltage lowers the barrier voltage and allows a current to exist through the diode. This bias voltage itself does not propel the charge carriers through the depletion region, diffusion does. But, the bias lowers the barrier voltage so that more charge carriers can diffuse and allow a current to exist. Because the bias voltage controls the charge carriers by diffusion instead of directly by an electric field, the current is proportional to the exponent of the voltage. This exponential relationship is true of any diffusion system, not just in semiconductors. A reverse bias does the opposite and can completely cut off the current.
Now, let me debunk a few myths. A current will exist in a diode anytime it is forward biased above zero. The current becomes significant at 0.6-0.7 volts, but it is still there at lower voltages. The current varies with the voltage, which usually changes only a few millivolts. The current can be calculated by Shockley's diode equation,
http://en.wikipedia.org/wiki/Diode_modelling . Voltage across the diode controls the current not the other way around. Although you can invert Shockley's equation and get voltage in terms of current, that is only what the voltage should be if that current were present. The physics of the diode determine what controls what, and you cannot explain how you can control a diode with current like you can do so with voltage. Energy is dissipated in a diode by heat and light if it is a LED. The rate of heat energy dissipation is the current times the voltage across the diode.
Ratch