My apologies, I was only responding to the previous comment, forgot momentarily about others, sorry about that. Let me try to fix this.
A computation engine based on rewrite rules, in general, performs computations by replacing instances of certain patterns by some other patterns. Patterns can be literal or generic. The rules according to which these rewrites are done are "code" of the computation, they determine what computation the system performs. Different rules can result in a system that may do one of: computing prime numbers, computing digits of pi, factoring large number in prime divisors, finding the shortest path visiting all cities exactly once in a given map, rendering a 3D scene from a list of objects and coordinates, finding the best potential dating matches for a given user out of list containing many other users, or outputting a Schonberg-style tonal composition in waveform with synthetic piano-like sound.
The lambda calculus is one such type of computation system. The core element is a lambda expression of the form (\x.y), where "\" is just ASCII for the greek lambda letter which is hard to type for me now. The core thing a lambda-calculus system does is it takes lambda expressions and it applies a simple rewrite rule: where there is a sequence of the form (\x.y)z, where x,y,z can be anything, it will substitute the whole thing by "y", but wherever "x" appears inside "y", it will write "z". For example:
(\x.xx)A
Will be rewritten to:
AA
Given an initial string, the engine that computes the lambda expression will apply this rewrite rule repeatedly until no more rewrites can be done. This may or may not reach an end (this is the halting problem - in a general case, it is impossible to know whether the computation will reach an ending point or not).
The rewrite rule is called "beta reduction", by the way, but try to remember the concept, not the name, which is arbitrary and unimportant.
Using lambda notation you can craft code that will do any of the things above. The code will look like a long lambda expression, which the lambda-calculus engine can work on following the standard rules to end up producing the end result.
The Y combinator is a specific (\x.y) lambda expression that, once applied to some value by the rewriting system, it results in a computation being done on that value, plus an extra copy of the Y combinator, thus allowing a new iteration of the same computation. Thus resulting in being able to keep on computing - thus being able to compute anything requiring arbitrary recursion, such as the factorial of a number, the Ackerman function, the shortest path in an arbitrary graph, or whatever.
Although I've never seen Paul Graham explain it, my take is that the accelerator is called Y Combinator because they put some money in, this allows the startups to get to profitability, they get their money back, and they can use it again to fund new startups, thus achieving infinite effective resources from finite initial resources.
PS: the author of the original comment was handwaving and nitpicking since he didn't like being in the point of having missed something (which we all do quite often, incidentally, including myself in the previous comment). I don't like that behavior and I don't like the time and energy waste it results in, thus my dismissive response, apologies everyone for not responding constructively.