On discount rates

The future is uncertain. Alternate investments exist. Thus, the present value of money is higher than the future value of money. Spending it now means we could do some good now. Spending it now means we can't spend it on other things later. 

How to determine where to spend money? We make some estimates about how much benefit we are going to get for spending it one way versus the other*. Basically, we make some Silly Wild-Ass Guesses (SWAG) about how many people are going to benefit, and how much they are going to benefit. This will involve a certain amount of math, typically in quantifying how much benefit and how much that benefit is worth, which is then multiplied by how many people get the benefits. Do this for both. The one with the larger number wins. If the two things cost different amounts, it's slightly more complex: To get the benefit/cost ratio, you divide the benefit by the respective costs. Again, the bigger number wins. 

 Now, lets talk about time. 'A dollar today is worth more a dollar tomorrow', epigramatically speaking. More realistically might be '$365 today is worth more than $365 in a year'.  Because in that year, you might die, the guy who promised you the $365 might die, hyperinflation might take hold, etc. (Any inflation makes this a truism: a dollar today buys more than it will buy in the future). 'A bird in the hand is worth two in the bush' is a way of reflecting that risk premium. 

But how much less? Nobody knows, but some rate is typically used to assess what percent less money is worth next year than the present year.

* Not spending the money isn't an option in this decision context. If you are evaluating alternatives, you are assuming you've already got (or will get) the money.