S_N2 indicates a substitution, nucleophilic, bimolecular reaction, described by the expression rate = k [Nu][R-LG].
This implies that the rate determining step involves an interaction between these two species, the nucleophile and the organic substrate.

This pathway is a concerted process (single step) as shown by the following reaction coordinate diagrams, where there is simultaneous attack of the nucleophile and displacement of the leaving group.

The nucleophile attacks at the carbon with the partial positive charge as a result of the polar s bond to the electronegative atoms in the leaving group.
	Single step reactions have no intermediates and a single transition state (TS).  In an SN2 there is simultaneous formation of the carbon-nucleophile bond and breaking of the carbon-leaving group bond, hence the reaction proceeds via a TS in which the central C is partially bonded to five groups.
General case		SN2 reaction

Let's look at how the various components of the reaction influence the reaction pathway:

R-
Reactivity order :  CH₃-  >  CH₃CH₂-  >  (CH₃)₂CH-  >  (CH₃)₃C-

In an SN2 reaction, the transition state has 5 groups around the central C atom. As a consequence of the steric requirements at this center, less highly substituted systems (i.e. more smaller H groups) will favour an SN2 reaction by making it easier to achieve the transition state.

The following two series of images show  four alkyl bromides and a chloride ion as a potential nucleophile. Relative rate of reaction data for an S_N2 reaction with iodide is also given.
Use the lower row of space filling models (which are great for seeing steric effects) to rotate the molecules to look at the electrophilic C center from the side opposite to the leaving group (which is where the nucleophile attacks from) to see how much of it the electrophilic center you can see.
If you need help recognising the electrophilic center, use the L button to highlight it.
 

Notice how as the steric crowding increases around the electrophilic center that the rate of reaction with iodide decreases.

-LG
The C-LG bond is broken during the rate determining step so the rate does depend on the nature of the leaving group. However, if a leaving group is too good, then an S_N1 reaction may result.

Nu
Since the nucleophile is involved in the rate determining step, the nature of the nucleophile is very important in an S_N2 reaction. The more reactive the nucleophile, the more likely the reaction will be S_N2 rather than S_N1.

Stereochemistry
When the nucleophile attacks in an S_N2  it is on the opposite side to the position of the leaving group. As a result, the reaction will proceed with an inversion of configuration.

Solvent
Polar aprotic solvents can be used to enhance the reactivity of the nucleophile and help promote an S_N2 reaction.

Summary
This pathway is most common for systems with poorer leaving groups, 1^o or 2^o substrates and stronger nucleophiles.
A typical example is the reaction of  NaI with primary alkyl halides or tosylates.