dbac did a good job of explaining the difference between threaded (old) and threadless (new) headset systems, and why you have the latter.
If you need more explanation, Sheldon Brown's website has an article with pictures:
http://sheldonbrown.com/headsets.html
As for "flipping" the stem, some threadless stems leave the steerer tube at a 90 degree angle. For these, flipping the stem will not change the handlebar height.
But for most stems, they leave the fork's steerer tube at a less-than or more-than 90 degree angle. And flipping the stem changes less-than-90 to more-than-90, and vice versa.
Here are a couple of pictures of such a stem. In both pictures, the part that clamps to the fork's steerer tube is on the left, and the part that clamps to the handlebar is on the right. The stem is flipped between the two pictures; in the first picture it is angled down and the second picture it is angled up.
This stem has a 7-degree difference (as labeled) and so when it's down it comes off the fork's steerer tube at an 83 degree angle, when it's up it comes off at a 97 degree angle.