Detonation is when the fuel/air mixture doesn't burn smoothly. Yes, it just doesn't explode in the cylinder, but combustion progresses like a wave from the glowplug to all points inside the engine until all of the fuel/air mixture can be consumed. In some cases, it's continuing after the exhaust port opens and keeps burning in the exhaust manifold. You see this on dragster engines when flames are coming out of the exhaust pipes. The fuel's still burning.

When an engine gets too hot or too lean, the fuel/air mixture doesn't burn smoothly, but goes all at once. This is explosive and doesn't provide as smooth a push on the piston. In fact, it's like hitting the piston with a hammer. It's also hotter than a normal burn.

If an engine is run too long while detonating, a hot spot under the glowplug can actually start to vaporize the aluminum of the piston. Eventually a hole will be burned into the piston, and the engine will quit because of the loss of compression. The hot exhaust gasses will also tend to erode the piston as it escapes, burning a trough into the piston there.

Sorry the pic is a tad blurry, but it does show the hole eroded in the piston crown, and the erosion at the exhaust port side. This is a badly-abused ducted-fan piston that got too lean and experienced severe detonation.

Detonation adds a "frying egg" sound to the exhaust note.