Once your catalytic converter reaches its operating temperature (known as "light off temperature" and usually between 400 and 600 degrees Fahrenheit) the catalyst compound coating the inner ceramics start to convert the three regulated harmful emissions into less harmful emissions. The three harmful emissions regulated by the EPA are Carbon monoxide (CO), Hydrocarbons (or VOCs for Volatile Organic Compounds), and Nitrogen compounds (NOx).
Carbon monoxide: Most of the used air leaving your engine is Carbon dioxide or CO2. But since combustion isn't always perfect or complete, some of the Carbon molecules only pick up one Oxygen to create carbon monoxide, a deadly, odorless gas. The catalytic converter creates a reaction between the CO and its surrounding air particles to create CO2 and H2O (water).
Hydrocarbons: A Hydrocarbon is any compound made of Carbon and Hydrogen that can be burned. Hydrocarbon emissions covers a range of harmful emissions, but they are all made up of unburned Carbon and Hydrogen. Hydrocarbons are harmful when breathed and contribute greatly to smog build up in urban areas.
NOxNitrogen compounds referred to as NOx have caused many an emissions test failure. NOx emissions are basically Nitrogen molecules that have combined with Oxygen and escape the engine unburned. NOx emissions cause smog and acid rain.
The compounds coating the inner structure of the cat literally strip, ram together, and otherwise muscle these emissions into less harmful gases and water, leaving the stuff that comes out of your tailpipe in much better shape.