Mark Thornton has put together a concise explanation of the latest economic bubble to burst - The Housing Bubble in 4 Easy Steps. Make sure you ride the real estate roller coaster at the end in order to get a feel for how long the bubble has been building.
Ultimately, the cause of the housing bubble and resulting "credit crisis" is fiat money and the federal reserve system. This means that our problems are rooted all the way back to 1913. More immediate causes include the implicit guarantee of Fannie and Freddie from the New Deal, the Community Reinvestment Act from 1977, and Greenspan's easy money policy which lowered interest rates to 1% in 2004. It is important to notice that all of these causes are government intervention spanning many decades; none of this was a result of inherent free market instability (despite what the media and politicians tell you). More government intervention is doomed to fail in attempts to solve the problem of government intervention. Thus, these bailouts and "stabilization plans" are guarantees for a much worse economic future than is required by the market.
Another great source for understanding the current state of the economy is this audio file of a conversation with Professor Joe Salerno from Pace University in New York. Finally, here is a great T-shirt available to purchase for those who support Austrian economics and disapprove of coercive government!
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