Quick summary:
XP are removed as a means of levelling. Everyone levels at the same time.
Everyone gets a certain number of Action Points every level - 5 + 1/2
your level. They can be used for any number of nifty things - bonuses to die rolls, retaining a cast spell, a temporary feat, things like that. You can also turn one in for 1000 xp worth of points to use for item creation or spellcasting. In other words, besides the normal time and money there's still an opportunity cost for item creation, but it's the tradeoff of "make a cool item vs. use an action point later in combat to pull your fat from the fire." There are some restrictions on this, but that's the basic idea.
Let's take for example an item that costs 12,500 gp and 1000 xp to make.
Underneath the new system, it would cost 12,500 gp and one action point.
Note that extra xp sticks around in a pool until you use it, so if you
turned in two action point but only used 1300 xp to make stuff, you'd
have a reserve of 700 xp for later.