Woodworm is a generic name for a group of wood-destroying species of insect. In general the default species referred to as woodworm is the Common Furniture Beetle, Anobium punctatum.
It has four stages of life; egg, larvae, pupa and adult. It is in the larval stage that the damage is done. The larvae eat the wood and and make tunnels as they go. Adult Anobium punctatum are 3–6 mm long. They have brown ellipsodial bodies and can fly. Adults do not feed on the wood only the larvae do that. They live about 30 days and their role is to produce more beetles. After mating the female lays her eggs in cracks and crevices in wood. Planed or painted wood is resistant. The eggs hatch after some weeks, each producing a small larva for which you need a x10 lens to see until it grows big enough.The larvae bore through the wood up to three years - a year in ideal conditions and eat predominantly the sapwood. They come to the wood surface to pupate. The adults then 'eat' through to the surface, making a 1mm to 1.5 mm exit hole, the first visible evidence for a survey to confirm an infestation.
A useful link in Wikipedia is here
http://en.wikipedia.org/wiki/Common_furniture_beetle
Much is said about the "need" to treat woodworm and much is nonsense. We advise our clients to monitor alleged attacks of woodworm and establish that treatment is necessary as in most properties over 100 years' old, treatment is not necessary as the woodworm is almost always dead.