It works in incredibly small steps. Once a certain animal is a certain degree different from another it is a seperate species (commonly defined as not being able to mate with another species).
Pretend that some animals have offpring that are 10 percent different from their parent, and that a difference of 50% is required for it to be a different species. So as the generations go on, it goes 10, 20, 30, 40, and finally 50 percent different. These animals are a different species from 5 generations back. Technically, the 5th generation could mate with the 4th and the 4th with the 3rd and so on. In this way drawing a species barrier is somewhat arbitrary because it is just a classification. These numbers are nowhere near as small as they are in reality though.
As far as apes and humans still existing it works like this:
Say your parents have two sons. You have blonde hair and your brother has red hair. Say that for some reason the red-heads in successive generations only gave rise to red heads and the blondes only gave rise to blondes (because only people with blonde hair have children with people with blonde hair and the same for red-haired people). After alot of generations the two might be so different that those with red hair could physically only have children with people with red hair (and the same for blondes). At that point they would be two different species.
My explanation isn't all that great, but I am sure you could find some good websites to explain it better.
"Faith is the great cop-out, the great excuse to evade the need to think and evaluate evidence. Faith is belief in spite of, even perhaps because of, the lack of evidence." -Richard Dawkins
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