Crystal malts are often also referred to interchangeably as caramel malts. This double naming is the result of centuries of convoluted brewing history, and it's still causing confusion today, since recipes, books, and supply stores tend to pick one name and go with it. To make matters worse, there are two types of caramel malt: one that's kilned and one that's roasted. The one that's also called crystal, and the one we're discussing here, is the roasted one.
I'm going to refer to it as "crystal."
While most malts are kilned to stop the germination process, crystal malts completely skip this step. Instead, the sprouted grains are roasted wet (or "green") to the temperature at which their starches turn to sugar, about 150F.
How is this process any different from kilning? Kilning heats the grains enough to dry them out, but not to convert their starches. Once those kilned malts are dry, they may be heated to a higher temperature to convert the dry starch, or just left as-is to be converted during the mashing process.
In the case of crystal malts, though, the kernels are still wet when they reach their conversion temperature. The starches convert in a semi-liquid state inside the shell of the kernel. It's like a tiny mashing process takes place inside every single kernel of barley.
After the starch is converted into sugar, the grains are heated to a higher temperature and dried.
(Even though crystal malts start out wet, they're sold dried). This process has a huge bearing on the qualities of the malt, and a vast variety of crystal malts result from the different temperatures they're heated to at this stage.
The temperature at which crystal malts are roasted can range anywhere from 180F to 350F.
This additional heat dries out the kernels, crystalizes (or caramelizes) the sugars inside, and darkens the color of the grain. As a rule, the higher the temperature is, the darker the color will be. This color imparts very well onto the beer - just a small amount of dark caramel malt will give your final product a nice dark hue.
A malt's color is measured using the unit Lovibond and can range from as low as 2 to as high as 500. Crystal malts take up a big portion of that range. The very lightest of crystal malts is the Cara-Pils, which has a Lovibond rating between 3 and 8. The very darkest is Crystal (or Caramel) 180L, which has a Lovibond rating of 180.
While there are some others (like the Cara-Pils), most of the crystal malts are named simply for their Lovibond rating, such as Crystal 60L or Crystal 100L. (Confusingly, they may also be sold as Caramel 60L or Caramel 100L, but you should treat them as the same thing). The number refers to how dark the color of the malt is and, consequently, how high the roasting temperature was.
The flavor of crystal malt also varies greatly depending upon the temperature reached. All crystal malts have a somewhat caramelly flavor, though the lighter colored ones have a light flavor similar to honey and the darker colored ones have a dark caramel flavor similar to toffee or even burnt sugar (but in a good way).
Since crystal malts are essentially mashed ahead of time by the maltser, does that mean you don't have to mash them? Essentially, yes.
The mashing process is all about heating the grains high enough to convert their starches to sugar and extract it into a liquid. Since the crystal malts' starches are already converted, they don't need to be mashed. Because of this, they're very popular as steeped grains in extract beers.
To do this, you can simply steep them in a nylon sack for about ten minutes in your extract boil to greatly enhance its flavor.
That being said, you can just as easily use crystal malts in an all-grain batch. A huge number of recipes call for them, though usually in small amounts. A standard 5 gallon batch often calls for about half a pound of crystal malted grains. Just because they don't need to be mashed doesn't mean they can't be - you can just include them with your base malts. It is essential to mix your crystal malts with base malts, though. Most of the sugars in crystal malts are unfermentable on their own - they need the diastatic power of base malts in order to ferment.