Gideon,
The documentation that Helen directed you to is quite good. I can assure you that this feature is also very good because I have used it a lot (almost weekly, as I transfer "clicker" data to Moodle). The key is that the Excel file needs to be saved in comma (or tab) separated value format. Then, you use Moodle's Import Grades feature, map the fields, and import. That's it. One more thing that is helpful (maybe needed). The CSV file should have a column with students' email address, which gets mapped to Moodles email field.