Conspiracies exist when groups as small as two individuals or whole governments work together to conceal actions which might be illegal, beyond their lawful authority, or destructive of others. Individuals can be arrested on conspiracy charges in most countries, even when they have not actually committed a crime or done an unlawful action.
Conspiracy theories arise in the absence of the truth. When the facts, truth, and intent are withheld from the public, then the conditions are ripe for speculation that can range from very sophisticated, well supported by evidence and observation and well presented; to speculation that is to the imaginary extreme.
Conspiracy theories can actually be a healthy social process, where the public makes it clear to the government, economic and business elites that they can only conceal so much of their actions and intent. The two major justifications for concealment of intent and activity are national security and right to privacy, but the lines are easily crossed when the public is kept completely and aggressively in the dark about major enterprises that have the potential to impact their lives in major, catastrophic, costly, or problematic ways.
Society generally wants to know how their tax dollars are being spent; whether experiments or technology that is more harmful than helpful is being developed; whether facts about impending disaster or attack are being withheld; whether facts that would change their beliefs, world view, or support for a government are being withheld; and whether secret plans to change their government system or way of life without their approval or knowledge is going on.
Society has plenty of historical evidence to support fears that the elites will take measures to protect themselves, leaving the masses to fend for themselves, as with the closing of castles and properties during the black plague. Society has more than enough proof that members of corrupted governments will seek to enrich themselves at the expense of the population. There are more than enough ecological disasters and damages to people that come from failure to reveal the potential harm that results from certain endeavors, such as strip mining, unsafe cars, bad prescription drugs, and a host of man made chemical and biological weapons.
As a result, societies have a "revelation limit" where the elite, business or government failure to reveal the truth about a matter of great importance and impact leads to alternative explanations of the truth. Then, there is the likelihood of accepting the most dire alternative explanation as the likely truth of the matter.
Conspiracy theories, like the imaginings that lead to religious mythology or dogma, become part of the human conscience as a form of meta knowledge, or knowledge that is gained by reasoning and common sense. It is meta knowledge that there will be corruption and corrupted interests that are carried out in secrecy whenever large businesses and governments are concerned.
As a result, conspiracy theories can also be a source of great mass entertainment that can be quite fantastic in the premises, but which are based in what the audience accepts as actual or possible reality. In the process of watching films and reality shows, or reading books, the population becomes aware of possibilities. Some will rule out the possibilities without thinking about them. Many people are capable of detecting any logical and factual flaws, but many are ready to accept that the speculation is reasonable and acceptable. A segment of society has emotional or intellectual problems and will actually accept the presentation as a realistic foundation of fact.
Conspiracy theories are best dealt with by understanding the classic errors in cognitive thinking, knowing how the logical fallacies in argument are used to support claims and in checking all of them with a critical mind.