. . . was totally hot and made a bunch of Congressmen look like total idiots. Granted, that involved mostly allowing them to speak uninterrupted . . .
Cliff Notes version - America and the Soviet Union were engaged in the cold war by proxy. The Soviets poured money and arms into South America to arm left wing groups like the Sandinistas whose aim was to terrorize the populace and overthrow the various governments, most of whom were no nicer but weren't Communist. The CIA poured money and arms into right wing groups like the Contras, who behaved pretty much the same way but liked us better than the Soviets. Since they weren't Communist, that made them by default our side.
Congress, being even then mostly Democrats and therefore leftists except when campaigning, decided that the Sandanistas were pretty good dudes and were only terrorizing the people for their own greater good, whereas the Contras were presumably terrorizing the people for their own amusement or, worse, for America's benefit. So Congress passed an Act that banned all support for the Contras and similar groups. (You might recognize that little trick from Vietnam, nothing the left likes more than making sure there's no way Communism can lose.)
Enter North and the CIA, long time warriors against creeping Communism and not about to accept oversight from any pinko Commies even if they do constitute the duly elected government they supposedly serve. Deprived of black funds but with several aircraft they began trading arms and South American drugs to raise money to equip the Contras and similar groups.
Now it gets a bit more complicated. The Shah of Iran, a real sumbitch but our sometimes pal and real close to Great Britain, gets overthrown by radical Islamicists. We via the UN then slap an arms embargo on Iran. The CIA wants to support moderates within Iran to combat the spread of Islamic terrorism. The CIA also wants to free some Westerners being held hostage by various Islamic terrorist groups. (Note: these are not THE hostages; those were freed on Reagan's inauguration because he had promised to use military force to free them. These were merely a handful of Westerners captured by Hezbollah, that noted humanitarian group.) Fundamentalist Iran has been invaded by socialist Iraq. Iraq is being supplied by the Soviet Union even though it is WAY far from being truly Communist, whereas Iran has practically no arms suppliers and has driven off or murdered most of its actual military professionals, so it's willing to deal with whomever will sell it weapons, even the great Satan. Part of the Iranian ruling class makes contact with the CIA and pretends to be a moderate group desiring to overthrow the Ayatollah if only they had some weapons - and even though they have NOTHING to do with those nasty Islamic fundamentalists they Do happen to have a lot of pull with them, so if the CIA could just get them some heavy weapons they'd have a nice word with their beheading buds over at Hezbollah and tell them what ever-so-nice folks Americans are and how they should thus release their hostages.
Now it gets even more complicated. Both parties are willing and eager, and the CIA has these arms and these planes, but we can't just fly into Iran. Even if we could trust Iran, someone would surely notice and say "Wait a minute, you said selling arms to Iran was
bad." But we CAN fly into Israel at will, and we can sell Israel weapons at will. And although Israel needs all the heavy weapons it can get, the idea of having a nearby and comparatively very large and powerful country NOT be led by those people pledging to wipe you off the map and kill or enslave your people is pretty sweet too. So Israel agrees, through its excellent spy network, to help us sell weapons to the supposedly moderate faction inside Iran. So the clandestine arms-running network that by law isn't supposed to exist is selling weapons to someone to whom it's not allowed to sell weapons. There are two benefits, the first being that Western hostages were actually freed - or to be more brutally honest, bought from the terrorist slavers who seized them. The second of course is that in a fight between a rat and a snake, it's to everyone's advantage that the two inflict as much damage on each other as possible. There was of course no moderate faction, merely those willing to deal with the Great Satan and the Little Satan because having killed or driven away almost all their military professionals and scientists, their fledgling little piece of hell was in real danger of being conquered.
Bottom line, we traded arms for hostages, perhaps with some justification of helping moderates in Iran and perhaps with no more than a polite fiction of justification, depending on how gullible you think the CIA was. (Before you answer, remember that this is an organization that supposedly once hatched a plot to kill Castro by paying a flower arranger to put a time release poison in his flower arrangement's water, and is the remnant of the OSS which had a plot to overthrow Hitler via a poison that made him less manly - in a regime rife with open homosexuals. When it comes to intrigue, Americans were and remain bumbling amateurs.)
Long story short - operation comes out, Contra arming comes out, North and Poindexter take advantage of Democrats' lust to get Reagan and disarm them (i.e. get blanket immunity), and finally Fawn Hall comes out, serenely beautiful and totally unflappable, and makes the Democrats look like total idiots. Riveting television and radio, really. Democrats were in the unique and unenviable position of being totally and completely correct in the law's eyes, and totally and completely wrong in the eyes of a majority of the voting populace. Like so many hullabaloos in Washington it ended up with a bunch of criminal prosecutions for relatively minor things, almost all of which were overturned on appeal, and all of which were later pardoned by Bush I.
There were two undeniably positive effects of the scandal itself. First, it made a portion of the populace pay attention to government, what it DOES versus what the Congressman SAYS he supports when he's back amongst the rubes collecting money and pandering for votes. Second, it hopefully made the CIA less likely to flaunt the law. Even if you do no prison time, being prosecuted is expensive and embarrassing and generally unpleasant. Whether you think there were any other positive effects largely depends on your political views. For instance, if like Craig you think (sorry, feel) that the Sandanistas are swell guys only concerned with spreading human rights and unicorn sperm, you'd think the scandal was a wonderful thing, as it disarmed the Contras and helped the Soviets establish Marxism as a legitimate form of government in South America. If on the other hand you think fighting Communism is the right thing to do at any price, then you'd think the scandal was a horrid thing, as it disarmed the brave freedom fighters. For myself, I think it was mostly a good thing. While I have the utmost respect for North and his service, and I largely share the CIA's desire to fight Marxism in all its forms, you simply can't have the CIA undermining the duly constituted government, no matter how inane the policies. To the extent that the scandal undermined this self-appointed shadow government, it was useful.