My understanding, and this is why I like it, is that Apple Pay uses a one time cipher (hereinafter OTC) for the merchant. It doesn't share the actual card info or user info with the merchant.

I'm guessing it works something like this: You put the card into Apple Pay. Apple makes an agreement with the card issuer (i.e. JoeBank). When you go to make a transaction at "DeeStore", you bring up the payment method in Apple Pay. Then it sends a OTC to DeeStore and then DeeStore uses said cipher to debit JoeBank (obviously the paying bank info is encoded in the OTC).

What I don't know is if the iPhone creates these OTCs on the fly, or whether they query the bank each time it's needed to get a new OTC to give the merchant. I guess we'll find out more about that later. The downside to the latter is that it would require network service which isn't a given in all stores.