An exchange, like the COINSTEC™ Exchange, is simply a platform that connects potential buyers with potential sellers.
It allows them to exchange things like products, stocks, currencies and in our case: Bitcoin. Please note COINSTEC™ doesn't buy or sell Bitcoin, neither do we set the rate of exchange, we're simply the platform to connect buyers and sellers.
As long as there are supply and demand for the items being bought and sold (bitcoin and local currency) more buyers and sellers will go to market and create their own orders, at prices higher or lower than the previous orders.
Eventually, the point will come where the market meets, where there is a buyer and a seller that agrees on a price. So, let’s say we have another seller with 1 BTC and they say: “I have 1 BTC I want to get 6000 ZAR for it”.
One thing to note is that in order to provide these exchange services, platform integration, customer support, security and make sure that the people trading on the exchange are credible, the platform (in this case COINSTEC™) will charge a small fee.
Real exchanges, like MtGox or Bitstamp, are really just a medium between traders. People can set limit orders to buy / sell bitcoins for a certain price. The exchange will match buyers and sellers when conditions of both the buyer and the seller are met.
More concrete, there are two types of orders: limit orders and market orders. Limit orders allow a trader to buy bitcoins at a price lower than the current price or sell bitcoins higher than the current price. However, these orders will only be executed once another user accepts them. Market orders will just find the best matching limit order.