Although I am relatively new to Steemit I think I've finally learned how the currency system works here. From my research, it seems there are three different types of currency and they each do a specific thing.
Steem, Steem Power, and Steem Dollars
Steem:
Steem is the base currency that is sold on the open market and exchanged for different cryptocurrencies such as bitcoin. Steem can be "powered up" into steem power which we'll discuss next or traded on the exchange markets.
Steem Power (SP):
Steem Power is compared to as a user's influence on Steemit. The more Steem Power you have the more your votes and posts are worth on Steemit and the more money you'll make from them. Converting Steem into Steem Power is called "powering up" and it is the most common way of increasing your SP. While there are a lot of useful things that you can do with Steem Power, SP is much less liquid than regular Steem and in order to cash out your Steem Power into other cryptocurrencies you will have to "power down" where you receive your SP in 13 equal weekly distributions.
Steem Dollars (SBD):
Steem Dollars are a liquid currency that was designed to be equivalent to $1 USD. Steem Dollars can be converted into Steem in three days which make Steem Dollars considerably more liquid than Steem Power if you're looking to cash out. This level of liquidity and Steem Dollar's fairly consistent value make it useful for trade and exchange between different people on Steemit as well.
Hopefully this helps some of the newer people to this platform understand the different types of currencies and how you can get paid on Steemit. If you have any other questions that I might be able to help with make sure to let me know down in the comments.
Best of luck!