Event Loop
The Node.js event loop runs under a single thread, this means the application code you write is evaluated on a single thread. Nodejs itself uses many threads underneath through libuv, but you never have to deal with with those when writing nodejs code.
Every call that involves I/O call requires you to register a callback. This call also returns immediately, this allows you to do multiple IO operations in parallel without using threads in your application code. As soon as an I/O operation is completed it's callback will be pushed on the event loop. It will be executed as soon as all the other callbacks that where pushed on the event loop before it are executed.
There are a few methods to do basic manipulation of how callbacks are added to the event loop.
Usually you shouldn't need these, but every now and then they can be useful.
At no point will there ever be two true parallel paths of execution, so all operations are inherently thread safe. There usually will be several asynchronous concurrent paths of execution that are being managed by the event loop.
Read More about the event loop
Limitations
Because of the event loop, node doesn't have to start a new thread for every incoming tcp connection. This allows node to service hundreds of thousands of requests concurrently , as long as you aren't calculating the first 1000 prime numbers for each request.
This also means it's important to not do CPU intensive operations, as these will keep a lock on the event loop and prevent other asynchronous paths of execution from continuing.
It's also important to not use the sync variant of all the I/O methods, as these will keep a lock on the event loop as well.
If you want to do CPU heavy things you should ether delegate it to a different process that can execute the CPU bound operation more efficiently or you could write it as a node native add on.
Read more about use cases
Control Flow
In order to manage writing many callbacks you will probably want to use a control flow library.
I believe this is currently the most popular callback based library:
I've used callbacks and they pretty much drove me crazy, I've had much better experience using Promises, bluebird is a very popular and fast promise library:
I've found this to be a pretty sensitive topic in the node community (callbacks vs promises), so by all means, use what you feel will work best for you personally. A good control flow library should also give you async stack traces, this is really important for debugging.
The Node.js process will finish when the last callback in the event loop finishes it's path of execution and doesn't register any other callbacks.
This is not a complete explanation, I advice you to check out the following thread, it's pretty up to date:
How do I get started with Node.js
