Craig here's a low down of how it works.
Basically it's a game of settings and time. There is 24 hours between Qualifying and Races, in which you do practice and warm-up to find the best set ups. The person with the best setups will utimately have the greatest chance of winning, bar mechanical faults or collisions in the race.
First of all you go to Garage > Car Setup and then click on the link that says 'Engineers Report', that will then tell you the sorts of set up for each setting you will need (High, Med, Low, Loose, Stiff ect.). Practice then to find the perfect times, the bar underneath each setting showing what settings the perfect setting lays between (0-100, which gets cut down by tweaking). You then go Garage > Qualifying Strategy and alter them to what tyres you wish to use and how risky each lap is.
Once Qualifying is over you have another session to tweak settings. Then go to Garage > Race Strategy and alter those settings with tyres, pit stops and stuff. Then you wait for the race and see the race lap by lap (Read what happens - Overtaking, pit stops ect.)
Make sure you check the weather conditions before each session and have the right tyres set up (Weather is shown at top right of screen).
Hope that helps