If you have an Interface IFoo and a class Bar : IFoo, why can you do the following:
List foo = new List();
It is to do with the creation of the List, you have specified the T to be IFoo therefore you cannot instantiate it as a Bar since they are different types, even though Bar supports IFoo.
The reason is that C# does not support co- and contravariance for generics in C# 3.0 or earlier releases. This is being implemented in C# 4.0, so you'll be able to do the following:
IEnumerable<IFoo> foo = new List<Bar>();
Note that in C# 4.0, you can cast to IEnumerable<IFoo>, but you won't be be able cast to List<IFoo>. The reason is due to type safety, if you were able to cast a List<Bar> to List<IFoo> you would be able to add other IFoo implementors to the list, breaking type safety.
For more background on covariance and contravariance in C#, Eric Lippert has a nice blog series.
Because a list of IFoos can contain some Bars as well, but a list of IFoos is not the same thing as a list of Bars.
Note that I used English above instead of using C#. I want to highlight that this is not a deep problem; you are just getting confused by the details of the syntax. To understand the answer you need to see beyond the syntax and think about what it actually means.
A list of IFoos can contain a Bar, because a Bar is an IFoo as well. Here we're talking about the elements of the list. The list is still a list of IFoos. We haven't changed that.
Now, the list you called foo is still a list of IFoos (more pedantically, foo is declared as a List<IFoo>). It cannot be anything else. In particular, it cannot be made into a list of Bars (List<Bar>). A list of Bar is a completely different object than a list of IFoos.