It does *not* mean that a party needs 50% of the votes to win. A party wins the election if they get more than 50% of the seats, rather than 50% of the votes.
It is perfectly possible for a party to win this election having won the largest number of seats but not the largest number of votes.
If the Lib Dems win the largest number of votes, they probably will not win the election because the electoral system systematically discriminates against the Lib Dems. At the present time, the electoral system is most friendly to Labour, it is disadvantageous to the Conservatives and very disadvantageous to the Lib Dems.
If the Lib Dems' support increases by a few percentage points, it probably creates a further advantage to Labour. If the Lib Dems support increases a great deal, it might start working in favour of the Conservatives. Either way, it is almost impossible for the Lib Dems to actually win an overall majority.
The simplest definition of a hung parliament is that it is one where no party manages to achieve the magic figure of 326 seats.
In the event of a hung parliament, Gordon Brown will remain Prime Minister until someone can form a government. There are then various possibilities, such as:
1. Labour or the Conservatives govern in a "minority government" (meaning that their measures could be continually rejected by parliament).
2. Something similar to the "Lib-Lab pact" of the 1970s (there is a minority government but the Lib Dems promise to allow the government to govern).
3. A two-way coalition between Conservative and Lib Dems, Labour and Lib Dems or even Conservative and Labour.
4. A three-way coalition.
5. A coalition which includes the other parties in parliament e.g. the Northern Ireland Unionists could support the Conservatives or the Welsh and Scottish Nationalists might support Labour.
6. Nothing works, the Queen dissolves parliament and we have another General election.