How does ACH work in practice, how are payments processed, and how does ACH differ from RTGS and other local payment switches?

Gusto (formerly ZenPayroll) probably has probably the best explanation of how ACH works:

• How ACH works: A developer perspective - Part 1
• How ACH works: A developer perspective - Part 2
• How ACH works: A developer perspective - Part 3
• How ACH works: A developer perspective - Part 4

Another great resource to read is by Dwolla - which provides a great write up as well: ACH Payments for Developers (by a developer)

Especially important is paying attention to the time motion diagram in Part 3. I've included another snapshot of what a time motion diagram looks like:

A summarized flow looks like the following:

The ACH more or less follows the same principal of Net Deferred Settlement Process. An example of how net deferred settlement is done, is provided here: Faisal Khan's answer to How does the settlement of payments work in banks? Specifically, how do payment systems that are connected to multiple banks actually settle the amount between two banks?

If real-time access to bank host switches are provided, then the settlement can be done in real-time.

Example of process flow by Vocalink, the operators of FasterPayments in the UK.