Does anyone understand the Champions League draw system?

If so, would you be kind enough to explain it? There were 3 of us in the pub watching it, all big football fans, and none of us had any idea what was going on!

For example, Panathinaikos were blocked from going in FOUR groups I seem to remember, which completely baffled me... Teams from the same country then get put in the same group :S

Are some teams grouped together or something before the actual draw itself takes place?!

 

Apart from Liverpool, teams can't go into same groups as teams from same country. Teams are also seeded.

 

2 seeded teams and 2 non-seeded into each group.
Teams cannot be placed into the same group as one from same country, however this was different for Liverpool due to the exceptional circumstances (i.e. rules changed to let them in) and had Everton got through it would have been difficult to maintain the format of the draw and keep all the English teams apart.
Can't comment too much about the Panathanikos one but I suspect it was a combination of keeping them away from other Greek teams and also the unseeded allocation full in other groups (assuming they are unseeded) - even when there were still unseeded places available they may block that group as it may be such that they have a Spanish team still to draw but only 2 groups they can go into due to other Spanish teams already in groups so it has to be frigged around - if you get my drift.
It's that complicated that SI didn't bother with a "live draw" option for the groups on FM05 unlike in other cups as theres probably a far bit of behind the scenes processing going on with them being moved around.

 

This should explain it

http://www.uefa.com/competitions/UCL/news/Kind=1/newsId=329481.html

When a paired club is drawn, for example, into one of the red groups, the other paired club – once it has been drawn – will automatically be assigned to one of the four blue groups.

 

Right okay thanks, that has helped a little at least!