Since computers cannot pick random numbers(can they?) how is this random number actually generated. For example in C# we say,
Random.Next()
Knuth covers the topic of randomness very well.
We don't really understand random well. How can something predictable be random? And yet pseudo-random sequences can appear to be perfectly random by statistical tests.
There are three categories of Random generators, amplifying on the comment above.
First, you have pseudo random number generators where if you know the current random number, it's easy to compute the next one. This makes it easy to reverse engineer other numbers if you find out a few.
Then, there are cryptographic algorithms that make this much harder. I believe they still are pseudo random sequences (contrary to what the comment above implies), but with the very important property that knowing a few numbers in the sequence does NOT make it obvious how to compute the rest. The way it works is that crypto routines tend to hash up the number, so that if one bit changes, every bit is equally likely to change as a result.
Consider a simple modulo generator (similar to some implementations in C rand() )
int rand() { return seed = seed * m + a; }
if m=0 and a=0, this is a lousy generator with period 1: 0, 0, 0, 0, .... if m=1 and a=1, it's also not very random looking: 0, 1, 2, 3, 4, 5, 6, ...
But if you pick m and a to be prime numbers around 2^16, this will jump around nicely looking very random if you are casually inspecting. But because both numbers are odd, you would see that the low bit would toggle, ie the number is alternately odd and even. Not a great random number generator. And since there are only 2^32 values in a 32 bit number, by definition after 2^32 iterations at most, you will repeat the sequence again, making it obvious that the generator is NOT random.
If you think of the middle bits as nice and scrambled, while the lower ones aren't as random, then you can construct a better random number generator out of a few of these, with the various bits XORed together so that all the bits are covered well. Something like:
(rand1() >> 8) ^ rand2() ^ (rand3() > 5) ...
Still, every number is flipping in synch, which makes this predictable. And if you get two sequential values they are correlated, so that if you plot them you will get lines on your screen. Now imagine you have rules combining the generators, so that sequential values are not the next ones. For example
v1 = rand1() >> 8 ^ rand2() ... v2 = rand2() >> 8 ^ rand5() ..
and imagine that the seeds don't always advance. Now you're starting to make something that's much harder to predict based on reverse engineering, and the sequence is longer.
For example, if you compute rand1() every time, but only advance the seed in rand2() every 3rd time, a generator combining them might not repeat for far longer than the period of either one.
Now imagine that you pump your (fairly predictable) modulo-type random number generator through DES or some other encryption algorithm. That will scramble up the bits.
Obviously, there are better algorithms, but this gives you an idea. Numerical Recipes has a lot of algorithms implemented in code and explained. One very good trick: generate not one but a block of random values in a table. Then use an independent random number generator to pick one of the generated numbers, generate a new one and replace it. This breaks up any correlation between adjacent pairs of numbers.
The third category is actual hardware-based random number generators, for example based on atmospheric noise
http://www.random.org/randomness/
This is, according to current science, truly random. Perhaps someday we will discover that it obeys some underlying rule, but currently, we cannot predict these values, and they are "truly" random as far as we are concerned.
The boost library has excellent C++ implementations of Fibonacci generators, the reigning kings of pseudo-random sequences if you want to see some source code.