The basic runaround is that NBC was unhappy with Conan's ratings in the Tonight Show, but NBC kinda sabotaged him in the first place by putting Leno in the prime time spot. Leno's ratings weren't great either, and the affiliates were complaining because it lowered their ratings for the local news.
So NBC wanted to move Leno back to 11:35, and push Conan to 12:35. He objected (his reasoning being that "The Tonight Show" should not air in the morning of the next day). So NBC bought out his contract, with the condition that he could not be on TV for so many months, and put Leno back at the Tonight Show.