Can someone explain bidding wars to me?

We are in a situation where we may need to move out of our current home fairly soon, so I have been looking at real estate guides for a while, just in case. We decided to call a buyer's agent to help us out (the BA was recommended by a friend). I called the BA to ask to see if she could show us a certain house and she told me it was under contract already. I asked her if the contract for some reason fell through, that we would still be interested in looking at it, so she said she would call and find out more details.

Not that I am interested in getting into a bidding war per se (esp. on a house I've never seen inside :-) but can someone explain how "bidding wars" work? Let's say that someone offered a price on a house, and we were willing to pay more? How does one jump into such a thing? Do you have to try to put an offer in right when someone else has, and nothing has been set in stone yet? (Sorry if this is a newbie question but we built our home, and thought we'd be there for a long time so this is fairly new to me)

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