A power grid is made up of three parts (yes, it is that simple): generation, transmission and distribution. If any one part fails, power does not move.
The grid always has to be in perfect sync. The amount of power going onto the grid (generation) always has to be exactly the same as the amount coming off (distribution). Transmission is what gets the 'trons from one place to another. Oh, and the frequency and phase of the power entering the grid has to match the grid.
If there is an imbalance, something has to give. Imagine that a section of the city consuming power is suddenly isolated from the rest of the grid (transmission failure or distribution failure). The amount it was consuming suddenly needs to not be put on the grid. The generator (in this case a nuke plant) can't just dump the power into the nearest river. There is no good way of making 'shock absorbers' on a massive scale. In order to protect the generation capability, generators are programed to automatically 'trip' off-line, essentially deactivating the electromagnets producing the power.
When the generator trips off, if the amount it was producing was greater than the amount already shed from the grid, other generators have to spin up and put out more power to make up for the loss. If this surge in demand is too great, generators are put at risk and there is an increased chance of other generation or transmission malfunction. The operating generators are then isolated from the grid, causing another deficit. This deficit causes more distribution problems further away, and the failure propagates rapidly.
In this case, it appears that the system worked as designed. Probably a subsystem transformer (distribution system) or minor transmission line went down, causing a power flux to the power plant. The plant shut down for safety, as it should have. Generators are designed to trip off-line so that they can be rapidly restarted with minimal damage. Yes, people are inconvenienced, but not nearly as much as if the generators were damaged or destroyed.
It is actually pretty hard to get the grid back up and running, which is why they do it one area at a time. Load (toasters, TVs and other powersuckers) must match the available generation. It is more complicated than flipping a switch, and amazing that this fragile system goes down so rarely and comes back so swiftly.
People have been critical of the administration's efforts to get power back up and running in Iraq, but the situation there was terrible. Transmission lines were in poor shape and darn near impossible to defend. Generation was is terrible shape due to 20 years of neglect, and there distribution system was centered around Baghdad and designed not for redundancy or fairness, but rather to let Saddam control the people by giving power to those who were docile and taking it from his enemies. The fact that we have been able to get things running as well as we have is a great tribute to those brave troops (American and Iraqi, as well as some from some other allies) who have toiled long and whose deeds have as long been unheeded in the press reports of the war.