The first step, I've found, is to explain what it is without worrying about any sort of stigma the other person might have towards it. Most people -even if they aren't gamers- are willing to listen and attempt to understand the premise of the game. Most people have also roleplayed at sometime in their life; even if they aren't aware of it.
One way I used to explain rpgs was to liken them to Choose Your Own Adventure books. The story gives you choices, and you get to choose what your character wants to do in the situation. It's a very similar idea; you just used dice to detemine the outcome of your action. Unfortunately, I've found that not many people seem to know what CYOA books are anymore.
The other way I've had success using is to describe it as a more grown up version of playing 'pretend' or 'cops and robbers' as a kid. The rules are needed as a way to measure what success and failure and to prevent situations that we had as children with... "I shot you!" "No ,you didn't" "Yes, I did."
Branching off from the book example, I've come to explain RPGs like playing a character in a book. I like to use 'book' rather than 'movie' because books tend to spend more time on character developement and describing the character of the characters; I've found that it tends to convery more of a sense of playing a role and telling a story than a movie does.
I say that the GM is like the author, and he writes the story, but each player gets to choose/write what their character does in parts of the story. The GM might 'write' something such as the following: "You come the end of a hallway, and there are two doors; one on the left and one on the right." You then get to choose what your character does in the situation. Maybe you choose one of the doors and kick it open; maybe you listen at the door to see what you can hear; maybe you check for traps. Your character has skills and abilities which measure how good you are at performing those actions, and you also roll the dice to see how well you do. For example, having high skill in listening or getting a good roll on checking for a trap might mean that you hear someone talking on the other side or discover a hidden trap on the door.
In actual practice, I probably use a mixture of these ideas or change parts of them. It depends upon my target audience; different people respond to different things. However, as I said at the beginning, I think the best thing anyone can do when explaining rpgs is to be positive when they speak of the game. I don't (I think) look like what people imagine when they imagine the typical D&D player. I remember an experience at work where somebody was making fun of (to me) how some customers were dressed and said, "they look like they're probably the type of people who play D&D or stuff like that." I then commented, "well, I don't look like that, and I play D&D." I wasn't a prick about how I said it or anything, I was simply confident in my reply. Since then, my coworker has actually asked about how rpgs work.
Likewise, I've had very good luck explaining the game to females - something which many people on many fora seem to claim is a high DC task, and I've actually GMed for a group which was all female. If you hang your head and act like playing is some sort of crime or that playing is somehow socially wrong, people are going to pick up on that and react accordingly. I'm not saying you need to be Super Sunshine Susie when you explain the game, but don't be afraid to show that you have fun and enjoy the hobby.
I'll close by saying something I alluded to at the beginning of this post. Story telling is one of the oldest human activities. Even our ancient ancestors made rock paintings and told stories around the camp fire. Today, little boys and girls still play pretend, and adults engage in all manner of roleplay - some involving dragons and dice, and some... well, some involve leather armor of a different sort. As I've said already, don't be afraid to enjoy the hobby, and don't be afraid to show other people that you enjoy the hobby when they ask about it. A lot of communication is nonverbal; the way you talk about the game will have an impact on how other people hear about the game.
