I think it's well explained here -- quoting just the key sentences of the long article:
The general concept behind a
token-based authentication system is
simple. Allow users to enter their
username and password in order to
obtain a token which allows them to
fetch a specific resource - without
using their username and password.
Once their token has been obtained,
the user can offer the token - which
offers access to a specific resource
for a time period - to the remote
site.
In other words: add one level of indirection for authentication -- instead of having to authenticate with username and password for each protected resource, the user authenticates that way once (within a session of limited duration), obtains a time-limited token in return, and uses that token for further authentication during the session.
Advantages are many -- e.g., the user could pass the token, once they've obtained it, on to some other automated system which they're willing to trust for a limited time and a limited set of resources, but would not be willing to trust with their username and password (i.e., with every resource they're allowed to access, forevermore or at least until they change their password).
If anything is still unclear, please edit your question to clarify WHAT isn't 100% clear to you, and I'm sure we can help you further.
I too have been researching this question, and while none of the ideas below are complete solutions, they might help others rule out ideas, or provide further ones.
1) Simply remove the token from the client
Obviously this does nothing for server side security, but it does stop an attacker by removing the token from existence (ie. they would have to have stolen the token prior to logout).
2) Create a token blocklist
You could store the invalid tokens until their initial expiry date, and compare them against incoming requests. This seems to negate the reason for going fully token based in the first place though, as you would need to touch the database for every request. The storage size would likely be lower though, as you would only need to store tokens that were between logout & expiry time (this is a gut feeling, and is definitely dependent on context).
3) Just keep token expiry times short and rotate them often
If you keep the token expiry times at short enough intervals, and have the running client keep track and request updates when necessary, number 1 would effectively work as a complete logout system. The problem with this method, is that it makes it impossible to keep the user logged in between closes of the client code (depending on how long you make the expiry interval).
Contingency Plans
If there ever was an emergency, or a user token was compromised, one thing you could do is allow the user to change an underlying user lookup ID with their login credentials. This would render all associated tokens invalid, as the associated user would no longer be able to be found.
I also wanted to note that it is a good idea to include the last login date with the token, so that you are able to enforce a relogin after some distant period of time.
In terms of similarities/differences with regards to attacks using tokens, this post addresses the question: https://github.com/dentarg/blog/blob/master/_posts/2014-01-07-angularjs-authentication-with-cookies-vs-token.markdown
Best Answer
Let me come to your questions a little later down the line and start by actually discussing the whole purpose of a refresh token.
So the situation is:
The user opens the app and provides his login credentials. Now, most probably the app is interacting with a REST backend service. REST is stateless, there isn't a way to authorize access to the APIs. Hence, so far in the discussion, there is no way to check if an authorized user is accessing the APIs or is just some random requests coming through.
Now to be able to solve this problem, we need a way to know that the requests are coming from an authorized user. So, what we did was to introduce something called an access token. So now once the user is authenticated successfully, he is issued an access token. This token is supposed to be a long and highly random token (to ensure that it can not be guessed). This is where the JWT comes into the picture. Now you may/may not want to store any user-specific details in a JWT token. Ideally, you would want to just store very simple, extremely non-sensitive details in the JWT. The manipulation of the JWT hash to retrieve other user's details (IDOR etc.) is taken care of by JWT (the library being used) itself.
So, for now, our problem with authorized access is solved.
Now we talk of an attack scenario. Let's say using all of the above user Alice, using the app, has the authorized access token and now her app can make requests to all the APIs and retrieve the data as per her authorization.
Assume that SOMEHOW Alice loses the Access Token or put another way, an adversary, Bob, gets access to Alice's access token. Now Bob, despite being unauthorized, can make requests to all the APIs that Alice was authorized to.
SOMETHING WE IDEALLY DON'T WANT.
Now the solution to this problem is :
Using just the access token alone, it is hard to achieve condition 1 above, because be it Alice or Bob, it's the same authorized token being used and hence requests form the two users are not distinguishable.
So we try achieving 2 above and hence we add an expiration to the validity of the access token, say the access token is valid for 't' (short-lived) time.
How does it help? Well, even if Bob has the access token, he can use it only while it is valid. As soon as it expires, he will have to retrieve it again. Now, of course, you could say that he can get it the same way he got it the first time. But then again there's nothing like 100% security!
The above approach still has a problem and in some cases an unacceptable one. When the access token expires, it would require the user to enter his login credentials and obtain an authorized access token again, which at least in case of mobile apps, is a bad (not acceptable) user experience.
Solution: This is where the refresh token comes in. It is again a random unpredictable token that is also issued to the app along with the access token in the first place. This refresh token is a very long-lived special token, which makes sure that as soon as the access token expires, it requests the server for a new access token, thus removing the need for the user to re-enter his login credentials to retrieve a new authorized access token, once an existing one has expired.
Now you may ask, Bob can have access to the refresh token as well, similar to the way he compromised the access token. YES. He can. However, now it becomes easy to identify such an incidence, which was not possible in the case of an access token alone, and take the necessary action to reduce the damage done.
How?
For every authenticated user (in case of a mobile app, generally), a one to one mapped refresh token and access token pair is issued to the app. So at any given point in time, for a single authenticated user, there will be only one access token corresponding to a refresh token. Now assume that if Bob has compromised the refresh token, he would be using it to generate an access token (because access token is the only thing which is authorized to access resources through the APIs). As soon as Bob (attacker) requests with the newly generated access token because Alice's (genuine user) access token is still valid, the server would see this as an anomaly, because for a single refresh token there can be only one authorized access token at a time. Identifying the anomaly, the server would destroy the refresh token in question and along with it all, it's associated access tokens will also get invalidated. Thus preventing any further access, genuine or malicious, to any authorization requiring resources. The user, Alice, would be required to once again authenticate with her credentials and fetch a valid pair of a refresh and access tokens.
Of course, you could still argue that Bob could once again get access to both refresh and access tokens and repeat the entire story above, potentially leading to a DoS on Alice, the actual genuine customer, but then again there is nothing like 100% security.
Also as a good practice, the refresh token should have an expiry, although a pretty long one.