To be a little more precise:
The Schroedinger equation is a differential equation that describes the wavefunctions that the electrons can have. It can be written as:
H * Psi = E * Psi
H is an 'operator' that contains the formula for kinetic and potential energy, and it has derivatives in it. Operators act upon functions, resulting in new functions. Often, H is written as a matrix, and Psi as a vector, and the action of the operator is multiplying the matrix times the vector. H is the only thing you know when you start to solve the Schroedinger equation. Psi is an unknown function (or vector), it is the wavefunction of the electron. E is an unknown number (just a plain number), it is the energy of that wavefunction state.
Solving this equation, when you know H and nothing else, involves finding the small set of Psi functions that, when operated on by H, give back the SAME function, except scaled in size (by E). (You calculate E at the same time.) For a given H, there are only a limited set of Psi functions that come back the same, with only a change in size. These functions that work are called 'eigenvectors' or 'eigenfunctions', and the amounts by which they are scaled by H are called 'eigenvalues', if you have heard of those names.
For example, you could imagine a Psi function that is a constant value for all points in space, that is, Psi(x,y,z) = c. When you apply H to this function, you WON'T get something that is constant over all points in space, so you didn't just scale your function, so this Psi is no good as an answer. Only certain, special, Psi's will work. These are the allowed wavefunctions, your goal is to find them. This limited set of answers is the 'reason' why the allowed states are quantized.
Now consider the hydrogen atom... You can get the right H for this by considering the kinetic and potential energy of the electron, it turns out that H = -(hbar*hbar)/(2*m)*(d^2/dx2+d^/dy^2+d^2/dz^2) - e*e/r,
where d^2/dx^2 is the second derivative with respect to x, r = sqrt(x*x+y*y+z*z), e is the electron charge, m is an appropriate mass, and hbar is Plancks constant.
This is an easy enough H that is is possible to solve the equation in closed form (meaning you get an equation for the answer). This is complicated, but the Psi functions you get are the familiar electron orbital shapes, the s,p,d,f orbitals.
If you want to look past hydrogen, say to helium, you have to adjust your H so that it accounts for the repulsion between the two electrons. When you do this, H becomes complicated enough so that you can't get a formula for the wavefunctions anymore. You can use a computer to calculate approximations of them, however. The Schroedinger equation is still perfectly valid in this case, you just can't write the answers with a nice formula. It turns out, happily, that the new wavefunctions look a lot like the hydrogen ones, which is why chemists can use them to talk about other atoms.
You can adjust this for as many electrons as you like. Once you start getting into the heavier elements, Einstein's relativity becomes important, and the Schroedinger equation doesn't account for this, so it eventually breaks down. Until then, though, it is still perfectly valid, just hard to solve.
This might be more complicated of an answer than you wanted, but I'm not sure how to make it any simpler.