I'll try to answer this question twice, first for the specific case of heterotic strings on Calabi-Yau manifolds, and then for string theory on general backgrounds. But first we need to look at some details which precede string theory and even quantum theory.
http://en.wikipedia.org/wiki/Vibrating_string" is a type of wave motion. A complicated oscillatory motion can be understood as the combination of motions in separate modes, distinguished by wavelength or by the number of nodal points. See the picture: There's a fundamental mode, consisting of one big wave, and then faster vibrations consisting of smaller waves.
That's for a "string" with one end fixed at a point. For a closed string moving freely through space (imagine a rubber band floating through the space shuttle), it's all one loop, it's as if the ends are joined together, so the waves in the string can circulate indefinitely. The vibrations of a classical closed string can therefore be understood as a sum of waves moving in opposite directions around the string. In each direction, there will be a fundamental mode and then higher-frequency modes with smaller, sharper waves.
Now we come to quantum theory. In quantum theory we have probabilities. As it turns out, there are two ways to treat oscillatory motion in quantum theory. In the more obvious one, each mode has an infinite series of "energy levels"; at each level, there's a little more energy concentrated into the vibrational mode, and the average size of the oscillations gets bigger. The vibrations of the string in space are like this.
In the other type of oscillation, there are just two energy levels, which you could call "nothing happening" and "something happening". These are "fermionic modes" and they have a variety of mathematical descriptions, none of them very intuitive. The simplest way is to think of them as something that travels inside the string. As with ordinary waves, the fermionic modes can be moving in either direction around the string. The very definition of a superstring is actually, ordinary string plus these fermionic modes. (The ordinary modes are "bosonic".)
The heterotic superstring is a type of superstring which, along with the spatial, bosonic modes of vibration which arise from existing in ten dimensions, has different numbers of fermionic modes going "clockwise" and "anticlockwise" (or right and left) around the string. That's its distinguishing feature. These fermionic modes combine according to a big algebra or symmetry group called E8 x E8 (this is the symmetry group in the type of heterotic string that people think might describe the real world; there's another type with SO(32) symmetry).
The observable particles would all correspond to different lowest-energy modes of the string; the next higher levels would be very massive and unstable. If we were to consider the behavior of the heterotic superstring in ten large flat dimensions (i.e. no CY compactification considered yet), we can divide the excitations into two classes, "supergravity" and "super-Yang-Mills". The "supergravity" excitations include an ordinary, bosonic vibratory state which is the graviton, and a corresponding fermionic vibratory state which is a particle called the gravitino. The "super-Yang-Mills" excitations also include a boson and a fermion. All the observed particles - photon, electron, etc - have to come from these super-Yang-Mills excitations.
Without going into the details right now, maybe the important thing to understand is the various fermionic modes combine to produce a large number of super-Yang-Mills excitations, and then the geometry and topology of the Calabi-Yau affects them differently, just as it also affects the conventional, spatial oscillations of the superstring. Being wrapped around one hole in the CY is physically different from being wrapped around another hole in the CY, and it means that the string will be interacting differently with the geometric moduli defining the size and shape of the CY. In such a model, this is what gives the particles their different masses. But because CY dynamics is so difficult to calculate, people have mostly settled for getting other properties right, like the low-energy symmetries - some part of the E8 x E8 symmetry that still survives even after compactification. http://arxiv.org/abs/hep-th/0501070" is an example of such a model.
So, there's the first answer. I promised a second answer. Here I just want to say that the heterotic string is just one branch of string theory. String theory really descends from an 11-dimensional theory in which you have 2-dimensional "supermembranes", and a superstring in 10 dimensions is actually a supermembrane in 11 dimensions, but with one of the supermembrane's internal directions extended along the extra 11th dimension. For example, the heterotic string is actually a supermembrane in the shape of a cylinder stretching through the 11th dimension, and attached to two "domain walls" (http://www.sukidog.com/jpierre/strings/mtheory.htm" ). So when we talk about a heterotic string in a space which consists of three large space dimensions, one time dimension, and six small space dimensions in a CY shape... really there are two three-dimensional boundary spaces, and a four-dimensional "bulk" between them, and the string we see is just the circle at one end of the cylinder. (There's one "E8" set of fermionic modes at each end of the supermembrane, which is where the combined E8 x E8 comes from.) But the width of the eleventh dimension is small, like the CY.
That may have confused you unnecessarily, but I just want to say that the superstrings of string theory are really supermembranes from the 11-dimensional theory, M-theory, and you can define M-theory on spaces apart from the background I just described. The eleventh dimension can be a loop rather than a line (the line is the gap between the boundary spaces), and in that case, the supermembrane can wrap around the loop to give rise to a different sort of superstring. In these other string theories, things are a little different. The same picture of bosonic and fermionic vibrations still exists, but you can have membranes as well as strings, and you can have "open strings" that are attached to membranes, and so there are extra factors at work. The world might be based on those other types of strings rather than on heterotic strings, and so we have to consider other models too.