What happens in the brain?

The root cause of Alzheimer's disease is still very much unknown, but the mechanism for how it works is mostly identified.

Alzheimer's disease is characterized by structural changes in the brain. (This is why a sure diagnosis of Alzheimer's disease is through autopsy.)  Firstly, amyloid plaques are formed as deposits of β-amyloid proteins that can accumulate in the brain, leading to disrupted electrical signals between the neurons that make up the brain. Secondly, there are neurofibrillary tangles, which are collections of twisted protein threads inside neurons which impedes normal brain function. Both these proteins work together to cause the gradual cell death in the brain and leads to increasing dysfunction of the neurons. Synapses (which as the connection sites between communicating neurons) deteriorate and die off and whole brain cells themselves also start to die off. In addition to this, there is also decreased production of neurotransmitters (which are the chemicals used by the brain and nervous system to communicate information). 

All in all, Alzheimer's disease causes problems for communication between the different cells in the brain, therefore negatively affecting brain activity and function.

Source:
Russell, T. (2013, September 20). Alzheimer's Disease. Retrieved January 21, 2015.