BY putting it into the boil, the Irish Moss gives off particles that enter the final wort (much too fine to strain out). When the yeast do their work and the sugar is used up, the yeast will clump together in groups of thousands and fall out of suspension (flocculation). The remaining proteins however are smaller and don't clump as nicely and remain in suspension, making the beer appear cloudy. The Irish Moss makes the smaller particle aggregate together into heavier/larger particles which makes them fall out of suspension, making your beer clearer. Boiling it releases the k-carrageenan, which is some sort of polymer which is what forces the particles of protein together.
Too much science! I need a beer!