There are lots subtleties and each manufacturer has its own selection of things they like to exclude from lower-level models but a few key specifications explain most differences:

• Sensor size. A bigger sensor cost more and offers an advantage in terms of image quality. In most cases, it also forces you buy heavier and more expensive lenses.
• 100% Viewfinder. If you want to actually see everything exactly as framed you need a 100% coverage finder and it will cost you.
• Weatherproof construction. The upper-high-end models are weather-sealed against rain, snow, sand, dust, etc. Not only do you pay for this, you have to pay more for lenses too because a non-weather-sealed lens on a weather-sealed body equals a non-weather-sealed camera.
• Dual Control-Dials. This always comes more more external buttons and means faster and more efficient operation and fewer trips through the menu system.
• Continuous Drive. Higher-end cameras often can shoot continuously faster and for longer which is appreciated for sports and action photography to capture the peak of the action.

There are reasons to choose a camera depending on each of the above points but once you find a camera that satisfies your needs, any money left-over is certainly much better spent on lenses. Lenses end up being a long-terms investment and usually rise in value, while cameras improves much faster and are less durable than lenses due to their complexity.

Normally, lenses that are designed for a mount and sensor size will work on any camera that matches or ones with smaller sensors. So an EF-S lens works on 7D, 60D or 500D but not on a 5D. An EF lens works on all Canon DSLRs. It works the same way for Nikon and Sony which have both cropped-sensors and full-frame DSLRs.