After the air you breathe in travels down your trachea, into your bronchi and into your bronchioles, it will finally end up in your alveoli. These look like little balls attached to the end of the bronchioles.
When the oxygen in the air you breathe in gets all the way down to your alveoli, it gets sucked right through the walls of the alveoli and goes into your blood, because your body needs blood filled with oxygen to survive.
It might seem strange that the oxygen goes right through the wall, but you can think of it like a very thin bed sheet. If someone blew air from a fan at you, you'd probably feel it. If they dumped a glass of water on you, you would definitely feel it! The walls of the alveoli are just like that, they are very very thin, so they let oxygen get through to your blood, but they don't let the blood come through into your lungs.
(from: wikipedia - alveolus)
Kid Facts - Blast from the past: Frontal Bone
