This misconception invariably arises out of plain ignorance. That is not to say that evolution deniers are generally ignorant people, but when it comes to the subject of evolution they usually have wild misunderstandings about pretty much everything to do with it. A bit of a sweeping generalisation, maybe, but fairly valid as anyone who has had to deal with creationists will tell you. (Many people do have a good depth of knowledge about it, but still choose not to accept it, mostly because it conflicts with their religious beliefs.) When it comes to, say, the history of Thailand, I am certainly ignorant - I know practically nothing about it whatsoever. If I then started sounding off about it, and explaining to someone what I thought about some issue to do with Thailand, my ignorance of the subject would be instantly obvious to anyone who had actually read up on the topic. This does not make me a stupid or ignorant person, but it does expose my misconceptions and lack of basic knowledge - the same applies to many of the people who say "Evolution is only a theory."
Fact
Life evolves. That is a fact. One of the simplest definitions of evolution is the change in the frequency of genes in a species over time.
For example, imagine if you will a rabbit farm high on a mountain. The farmer buys a thousand rabbits, some have longer fur and some have shorter fur - it's a quite mixed group of rabbits. The length of the fur on the rabbits is determined by their genetic makeup. Some have genes for long fur, some for shorter. Now, this farm (or ranch, if you prefer) is in an area that gets extremely cold for most of the year. The rabbits survival depends upon having enough fur to keep them warm. Those with short fur will freeze to death and die (our fictional farmer doesn't have much business sense).
Because of the situation these unfortunate creatures are in, they are subject to natural selection. There is a selection pressure for longer fur. More baby rabbits are born than can possibly survive in the environment. This is an important part of the process. Their genetic makeup is a determining factor in their survival. Rabbits that die of cold will not pass on their short-fur genes to their offspring (as they won't have any), whereas rabbits with long fur will be more resistant to the cold and therefore much more likely to reproduce, passing on their genes for long fur.
Over many generations, the farm will consist almost entirely of long-fur rabbits. The frequency of genes for short fur has decreased, and the frequency of genes for long fur has increased. Far fewer short-haired rabbits, and eventually none at all, will be born - their genes will have been lost from the gene-pool.
Some rabbits may have developed genetic mutations which further increase the length of their fur. These mutations will clearly give those rabbits an advantage in their environment, and those beneficial mutations will spread through the gene pool of the population. Mutations that are detrimental to the survival rate will clearly be lost quickly, as those unfortunate rabbits will have a reduced chance of surviving long enough to mate. In this way, useful mutations stay on in the population. It's a positive feedback loop - this is the second important thing to remember.
These rabbits have evolved. It's really that simple.
Evolution is a directly observable phenomenon. There is no debate among scientists as to whether or not evolution occurs, any more than there is debate about the Earth orbiting the Sun. Gene pools change - evolution happens. This is obviously a rather contrived example, but it serves to demonstrate some of the basic principles.
Now, objectors will say "Ah, but they're still rabbits, aren't they? That's not the same as amphibians turning into reptiles, and then mammals, is it? That still doesn't explain how a human can evolve from an ape-like ancestor, does it?"
Yes, it does. The change from mixed-fur rabbits to long-fur rabbits (in this example) is often referred to as micro-evolution - a minor change within a species. Larger changes are known as macro-evolution, and take far longer to occur, but the process involved is exactly the same - genes changing over time. It is a cumulative process - the minor changes build up over many generations into major changes. Given time, the descendants of these rabbits could become an entirely novel species of rabbit, and eventually a creature that can no longer be called a rabbit.
To say that you accept micro-evolution but not macro-evolution is akin to saying that it is possible to walk to the end of your street, but it is somehow impossible to walk to the next town. The process involved, putting one foot in front of the other, a single step at a time, is exactly the same although the end results may be completely different.
Evolution is a fact. This is not open to debate.
Theory
Darwin's Theory Of Evolution is not evolution. In the same way, the theory that the Earth orbits the Sun is not the Earth orbiting the Sun - it is a description and explanation of it.
The theory of evolution is an explanation of the facts of evolution.
If nobody had ever developed the theory, it would not change that fact that living things evolve over time - evolution happens whether there is a theory or not.
Furthermore, Darwin's theory of evolution may be totally, hopelessly and utterly wrong. Even if it were, and Darwin and every biologist who had contributed to the theory since were incorrect, evolution would still exist and continue. Evolution is totally independent of the theory of evolution. The theory is simply an attempt to explain the observed facts of nature that we call "evolution".
If another theory came along to replace the theory of evolution, it would have to explain the facts at least as well as Darwin's theory has done for the last 150 years. No such replacement has ever been produced.
If there is a debate or controversy within the scientific community about the theory of evolution, creationists see this as evidence that "evolution is in crisis". Nonsense - it is merely that scientists disagree (often bitterly) over details of the theory of evolution. That evolution actually happens is beyond question, but the theory of evolution is - and always should be, like every other scientific theory - probed, tested and scrutinised. Again, even if the theory were to collapse, that would still not magically disprove evolution or cause species to cease evolving.
What it is not
Evolution is not about the origins of life on Earth. Evolution is about the development of living things over time. The study of the origins of life is known as "abiogenesis" and any web search engine will find you many examples of current literature on the subject.
Evolution is not about the Big Bang theory, nor the formation of the Sun and Earth. These are subjects for cosmology, not biology. Some creationist websites like to put up list of supposedly tricky questions for evolutionists - if you read them carefully you often find lots of questions that actually have nothing at all to do with biological evolution.
Random. Evolution is often mistakenly compared to "a hurricane blowing through a junkyard and building a fully functional Boeing 747". This is incorrect, as evolution is a very slow, gradual process directed by the actions of natural selection (as shown above in the rabbit farm). Mutations may indeed be random events, but whether or not they remain in the gene pool is certainly not random, as it depends on how those genes affect the creature's survival in the environment. It works as a positive feedback loop.
Evolution is not about attempting to prove that the Bible, Qu'ran, or any other holy book is false. It is simply the study of living things and how they develop over time. Whether or not that conflicts with a particular interpretation of a particular scripture is not a consideration. There is no conspiracy amongst scientists to disprove the teachings of any of the thousands of religions who happen to make claims about the processes of life.
Evolution is not about monkeys turning into men, or showing that humans are "merely" animals. Evolution does show that humans developed from an ape-like ancestor, along with other modern apes such as the chimpanzee. We did not develop from apes, but alongside them, in the same way that different branches grow from the same trunk of a tree. The development of humans is one minor aspect of the study of evolution, but most biologists will find more interesting creatures to study.