Let me try explaining this a different way that may make it easier for folks without a lot of tax background to understand.

I am using the actual 2008 tax rates for someone filing single, though I am making up the deduction and exemption total of 20K for simplicity in calculations.

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Here's the scenario: You make 100,000 gross. After itemized deductions, let's say you have an Adjusted Gross Income (AGI) of 80,000.

Your tax is calculated as follows:
$ 802.50 = 10% tax rate on first 8,025 of AGI
$ 3,678.75 = 15% tax rate on next 24,525 of AGI
$11,575.00 = 25% tax rate on next 46,300 of AGI
$ 322.00 = 28% tax rate on last 1,150 of AGI
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$16,378.25 = total tax.

Your effective (overall average) tax rate = 16,378.25/100,000=16.4%

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Then you remember you gave $2,000 to the local Boy Scouts so they could go to the National Camporee. If you add that to your itemized deductions, you will reduce your AGI by $2,000. So your new AGI is 78,000.

So we repeat the above calculations with the new AGI.

$ 802.50 = 10% tax rate on first 8,025 of AGI
$ 3,678.75 = 15% tax rate on next 24,525 of AGI
$11,362.50 = 25% tax rate on last 45,450 of AGI
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$15,843.75 = total tax. This is a decrease of 534.50.

(534.50 = 322*28% + 1,678*25%)

Your new effective tax rate is 15,843.75/100,000 = 15.8%

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Further Analysis:

You saved 534.50 on your taxes by donating $2,000 to the Boy Scouts, but there was still a net cost to that donation of 1,465.50. This is an important point. Clearly, it doesn't make sense to give away 2,000 to save only 534.50, right? You have to have another reason for making the donation.

But the deduction does allow you to make a larger donation than you might otherwise be able to afford. If the donation weren't deductible, the government would get that $534 to spend rather than you giving it to the Boy Scouts.

Your actual tax rate only dropped by 0.6%. Not much. But it did move you down to the next lower tax bracket, from 28 to 25%.

Your marginal tax rate is defined as the rate at which the next dollar of income will be taxed. In the first scenario, that rate is 28%, but after the deduction, it was 25%. The marginal rate is also the rate of tax savings for the next dollar decrease in income, AKA the next dollar of deduction.

This marginal tax rate concept is why charitable contributions are so attractive to very high earners. Our chap above with the 25% marginal tax rate would get a $250 reduction in taxes if he donated another $1,000 to the boy scouts. So the donation would cost him $750.

His boss with an AGI of $500,000 would have a marginal tax rate of 35%. With the resulting $350 reduction in taxes, it would only cost him $650 to make that same $1,000 donation.

Increase the numbers and you see that it only costs Bill Gates 6.5M to donate 10M to charity.

I hope this is helpful.

Reference:
http://www.irs.gov/pub/irs-pdf/i1040tt.pdf page 92