Right, this is how it works as far as I understand.
If unrestricted, your torrent program will use all the upstream bandwidth available.
When you try to use the internet, to play a game, talk on MSN, or even visit a web page, you need to request information. Because the request is leaving your computer, you need upstream bandwidth to do this. But if your torrent is using all of it, your request won't get through, so the website doesn't know you want to load the page, for example.
Yes, thats probably an oversimplification.
Well, think of it like a crowd of people wanting to get into a shop. Say 100. But the door is only wide enough to let 1 through at a time. If 99 of those people are your bittorrent files uploading, and one of them is a request for a website to send information, its going to take a while for that one person to get through, by which time the request has probably timed out.
http://www.azureuswiki.com/index.php/Good_settings#Good_settings_based_upload_speed
That page may be designed for Azureus, but follow what it says to work out what upload speed you should set.