Please excuse me if this is a stupid question.

But i don't undestand how Server certificates make my server more secure. How do they work? This is new territory to me so please be gentle

i dont think they make your server more secure as such, they just tell the user that you are who you say you are.

Another thing that i noticed is that i need a certificate if i want to use Https.

I don't know anything about certificates - but somehow they have a connection to encryption - i think.

For example if i want to do credit card transactions then i need a certificate? - This will somehow give me 128bit encryption for my server???

I am trying to use a encryption class from Chillkat - but when i try to use the encrypt method it tells me that it can't find my secure server certificate.????

Have a read of this: http://www.iisfaq.com/Default.aspx?tabid=2470