The best resource on explaining blood sugar is Blood Sugar 101. She covers everything you need to know and I won't simply regurgitate her great work here. However I will go over at a high level what exactly is blood sugar and what affects it.
I also highly recommend reading The Diabetes Solution by Dr. Richard K Bernstein. He covers in detail how to achieve non-diabetic blood sugar levels and the information is valuable to both type 1 and type 2 diabetics.
The #1 thing to understand is that carbohydrates raise your BG! All carbohydrates whether they are sweet, starchy, fibrous or "complex" are simply chains of glucose. In the end whether you eat pure glucose or whole wheat bread, it all turns into glucose and raises your BG.
Your body can also create some glucose from protein, so if restricting carbohydrates isn't doing the trick you may want to look at the amount of protein you are getting in a single meal.