A credit default swap is basically a form of insurance that the buyer of say, a bond, buys from a financial institution, say a bank, against the bond's going "bad" (not paying in full).
Say the value of the bond was $1,000. A bank might charge an annual amount $10 per thousand if it felt that the bond had a slightly less than 1% chance of going bad in the coming year (because the $10 would include a commission). If the buyer paid $10 or 1% (the credit default swap rate), the buyer would be purchasing the right to sell back the bond to the bank for $1,000, no matter what the bond was really worth. This would be the "swap." And its purpose would be to protect against credit default.