A lichen is the result of a merger between a fungus and an algae. The algae uses the sun to photosynthesize while the fungus provides the support structure and water and mineral transport system. Either plant left to its own devices would struggle, and likely fail to survive. By combining forces, however, the fungus and algae are able to access more nutrition than either could ever find alone.
Lichens are often found on trees and are frequently blamed for their deaths. Most forms of lichens are not dangerous to trees, instead they move in to take advantage when the canopy of the tree begins to thin. Their positions on the trees give a secure location to anchor as well as access to sunlight in dark places like forests. When the tree whose canopy is failing eventually dies, the lichen's growth greatly increases because of the additional sunlight. This is why many dead or dying trees are often covered with lichens.
The scale-like formation of lichens is the one most familiar to the average person. However, there are actually three main forms of lichens. Crustose are those crusty patches we generally encounter. Foliose are more leaf-like, but are still found pressed closely against trees. Fruticose forms are often found hanging or even in the form of a small bush.
Being a symbiotic form of life, reproduction can be tricky for lichens. They often reproduce asexually when a piece of a lichen breaks off accidentally and attaches somewhere else. In other cases, the fungal body of the lichen produces spores that can become lichens if they are formed closely enough to a compatible algae. The fungal spores will capture the algae and take the algae along for the ride when they are ejected from the fruiting body.