What is meant by a persistent object? What it does? Will it always connects to the database in the background? How it inserts the values into the database when we set the values for the object?

Persistent means that the object (a Java object) will outlive the life of the virtual machine in which it was created. You can save it and then retrieve it later and it should contain the same information as before.

How Hibernate accomplishes this and what yu need to do to make it work for your application is a BIG topic. You should read the documentation that comes with HIbernate or purchase one of the books on the subject.

http://www.hibernate.org/hib_docs/v3/reference/en/html/architecture.html#architecture-states

section 3.2