Wikipedia has a good definition of a bouncer and its use in cricket:
http://en.wikipedia.org/wiki/Bouncer_(cricket)
To summarize, a bouncer is a delivery that is pitched short so that it bounces up to head height or above. It's generally used tactically in today's game, but in the past it has definitely been used in a more intimidatory way. It pushes the batsman onto his back foot, and usually a batsman will get out of the way or try to play it aggressively as Phil was doing here. If you get bat to ball, it can often end up as a boundary (4 or 6 runs). But it is also risky as it's hard to keep the ball on the ground, and can end up with the batsman being caught out. To address your question, you can only be caught out if it comes off the bat.
It would never have been Sean Abbott's intent to cause any harm to Phil Hughes. That's the purpose of the helmet, to protect the head in case a batsman misses. Batsman often remove their helmet when facing slower paced bowlers. Just unfortunate all the way around. I wouldn't be surprised if they make modifications to the helmets as a result of this incident.