What does "social capital" mean?
The central premise of social capital is that social networks have value. Social capital refers to the collective value of all "social networks" [who people know] and the inclinations that arise from these networks to do things for each other ["norms of reciprocity"].

How does social capital work?
The term social capital emphasizes not just warm and cuddly feelings, but a wide variety of quite specific benefits that flow from the trust, reciprocity, information, and cooperation associated with social networks. Social capital creates value for the people who are connected and - at least sometimes - for bystanders as well.

Social capital works through multiple channels:
Information flows (e.g. learning about jobs, learning about candidates running for office, exchanging ideas at college, etc.) depend on social capital norms of reciprocity (mutual aid) are dependent on social networks. Bonding networks that connect folks who are similar sustain particularized (in-group) reciprocity. Bridging networks that connect individuals who are diverse sustain generalized reciprocity. Collective action depends upon social networks (e.g., the role that the black church played in the civic rights movement) although collective action also can foster new networks. Broader identities and solidarity are encouraged by social networks that help translate an "I" mentality into a "we" mentality. What are some examples of social capital? When a group of neighbors informally keep an eye on one another's homes, that's social capital in action. When a tightly knit community of Hassidic Jews trade diamonds without having to test each gem for purity, that's social capital in action. Barn-raising on the frontier was social capital in action, and so too are e-mail exchanges among members of a cancer support group. Social capital can be found in friendship networks, neighborhoods, churches, schools, bridge clubs, civic associations, and even bars. The motto in Cheers "where everybody knows your name" captures one important aspect of social capital.

For more information on social capital, read Chapter 1 of Bowling Alone or see the following.

Civic Practices Network (CPN) has a good description of social capital.

Briggs, Xavier de Souza. "Social Capital and the Cities: Advice to Change Agents." National Civic Review 86, No. 2 (Summer 1997): 111-118.

Berry, Jeffrey M., Kent E. Portney, and Ken Thomson. The Rebirth of Urban Democracy. Washington, DC: Brookings Institution, 1993.

Ehrenhalt, Alan. The Lost City: Discovering the Forgotten Virtues of Community in the Chicago of the 1950s. New York: BasicBooks, 1995.

Lemann, Nicholas "Kicking in Groups." Atlantic Monthly (April 1996): 22-24.

Loury, Glenn "The Social Capital Deficit." The New Democrat (May-June 1995): 28-29.

Loury, Glenn, "The Divided Society and the Democratic Ideal." Boston University's University Lecture, 1996.

Portes, Alejandro & Patricia Landolt, "The Downside of Social Capital." The American Prospect 26 (May-June 1996): 18-21, 94. http://epn.org/prospect/26/26-cnt2.html

Potapchuk, William R., Jarle P. Crocker and William H. Schecter, Jr. "Building Community with Social Capital: Chits and Chums or Chats with Change." National Civic Review 86, No. 2 (Summer 1997): 129-140.

Putnam, Robert D. Making Democracy Work. Princeton, NJ: Princeton University Press, 1993.

Schambra, William and Michael S. Joyce. "A New Citizenship, A New Civic Life." The Hudson Institute: 139-163.

Skocpol, Theda. "The Tocqueville Problem." Address to Annual Meeting of the Social Science History Association, New Orleans, October 12, 1996. [There is an adaptation of this available here.]

Vanourek, Gregg, Scott Hamilton, and Chester Finn. Is There Life After Big Government?: The Potential of Civil Society. The Hudson Institute.

Verba, Sidney, Kay Lehman Schlozman, and Henry E. Brady. Voice and Equality: Civic Voluntarism in American Politics. Cambridge, MA: Harvard University Press, 1995.

Walzer, Michael, "Civility and Civic Virtue in Contemporary America." In Radical Principles: Reflections of an Unreconstructed Democrat. New York: Basic Books, 1980.

Walzer, Michael. "Idea of Civil Society." Dissent (Spring 1991): 293-304.

Wilson, William Julius. When Work Disappears: The World of the New Urban Poor. New York: Knopf, 1996.