Peer review is a process in which scientific ideas are evaluated by an independent body of experts. There is no specific method cast-in-stone, but some of the more common features are these:
- A preset list of academic standards required for submission, such as correct attribution of sources, absence of advertising, and absence of personal politics
- Independence of reviewers from both publisher and submitter
- Anonymity of reviewers
- Balanced panel of reviewers, from as large a pool as possible
- Mediated discussion between reviewer and submitter, i.e. questions and requests for revision, archived
A peer-reviewed paper is generally understood to be of higher quality because (a) it's been looked over by independent experts, and (b) the fact that the paper is ready for independent review reflects its maturity and cohesion. However, this is not always the case. Once in a while a flawed paper will slip through, and some excellent whitepapers are never submitted for peer review or are not approved for reasons having nothing to do with its merit (e.g. backlog of a particular publication).
There are other forms of peer review. As we speak, I am personally involved in a peer review of technology proposals, for instance. There are also engineering reviews (so-called NAR or Non-Advocate Reviews) that are similar, but not anonymous, essentially a face-to-face board of inquiry.
Check
Gravy's site for a list of relevant peer-reviewed articles. It's quite long. (ETA: Scroll to the bottom of
this page for a list.)
I don't know whether any "conspiracy theorist" has submitted a paper or not. I am almost 100% certain that none has ever been published. The journals do not report on paper rejections, as this would compromise standards of the review.
There are ways to "fake" peer-review, but only to the uninformed. An example is the
"Journal" for 9/11 Studies, which has its editorial staff perform many reviews, does not keep one article anonymous from another (allowing rebuttals to be penned by its board coincident with the articles they dislike), and keeps a highly selective list of other reviewers determined by their politics rather than their expertise. Nobody in the legitimate sciences is fooled by the
"Journal" of 9/11 Studies, but it is difficult for non-technical individuals to tell the difference.