I can give a rough picture of his account, though it will be lacking on detail.
Scientific progress is often characterised as an interlinking between theory; which generates propositions about the world; and experiment; which tests those propositions. This basic picture is correct.
Testing, as Popperian falsification is typically characterised in the following way: a proposition about the world is posited, an experiment either refutes or is consistent with that proposition. But this does not describe the activities of reasoning that science consists of very well at all. Consider the cases of the discovery of Neptune and the precession of Mercury.
In Neptune's case, Newtonian mechanics was applied to the orbital behaviour of another planet, Uranus, and it was found not to describe it very well. At this point, other astronomers posited the existence of another planet whose gravitational effects fixed those predictions; the planet who fixed those predictions was discovered where it was predicted to be, and Newtonian mechanics was vindicated.
In Mercury's case, Newtonian mechanics was applied to Mercury, and it was found that there was a deviation from the predictions. Scientists were reluctant to put Newtonian mechanics in the bin since it had been so successful, and instead posited that the astronomical measurements which established the deviation from the theory instead were in error. More precise measurements came along and vindicated that Mercury's orbit was not exactly predicted by Newtonian mechanics. Eddington's question to Einsten, then, made Einstein (and his wife!) go through all the tensor calculus required to predict the orbit of Mercury with his theory, and it was found to match the astronomical measurements. In this case, then, Newtonian mechanics was found to be wrong, and Einstein's theory supplanted it in some relevant sense.
What these cases show is the role of
auxiliary hypotheses and
hard cores in the process of scientific reason. We have a 'hard core' of a theory, which is constituted by its necessary commitments, and we have a belt of 'auxiliary hypotheses' surrounding that hard core which provide the interface of that hard core with experiment. The hard core in the Newtonian case was (roughly) the three laws and their associated calculus, especially Newtonian gravitation - and auxiliary hypotheses were observations, calculations and predictions about the motion of bodies; especially planets and their orbits. In the both cases, an auxiliary hypothesis was posited to protect Newton's theory of gravitation from refutation. In the case of Uranus' orbital measurements, this was that there was another planet which accounted for the deviation. In the case of Mercury's orbital measurements, this was that the measurements were of poor quality.
Let's pause at this point to highlight something important. Newtonian mechanics and Einsteinian mechanics required extra assumptions to interface with the real world; these were measurements of mass, orbital position and so on; the theories themselves made no specific predictions about the real world without having these other auxiliary hypotheses to provide grist to their mills.
Back to the account, we're now in a position to distinguish Lakatos from Popper in terms of falsification. There are two big differences.
Firstly, Lakatos characterises falsification as operative not on singular propositions, but on series of propositions. Such a series might be 'The laws of Newtonian mechanics + observations about Uranus' orbit' or 'The laws of Newtonian mechanics + observations about Mercury's orbit', and when falsification strikes (when 'Nature shouts "No!" as he puts it), it does not act on a specific proposition, but on the composites "The laws of Newtonian mechanics + observations about Uranus' orbit'. The composites are treated in the sense of logical conjunction, so when we falsify "The laws of Newtonian mechanics + observations about Uranus' orbit', we de Morgan's law it up and negate a single set of conjuncts. In the Uranus+Neptune case, the negation operated on the existence of relevant celestial bodies, in the Mercury case, the negation
first was thought to operate on the measurements of Mercury's orbit
then when they were shown as good, it operated on the hard core of Newtonian gravitation.
The habits of scientists, then, are when Nature shouts no, they prefer to reject an auxiliary hypotheses and posit a new one rather than reject some part of the hard core. This is what makes the hard core 'hard' - it is refutation resistant in the practice of scientists - whereas the auxiliary hypotheses are the easier candidates for refutation.
The second difference from Popperian falsification is that the rejection entailed by Nature shouting 'No!' is weakened. We don't reject Newtonian mechanics entirely just because it fails to model the orbit of Mercury, we rather constrain its application to a domain of relevance, and this is done adaptively with respect to theoretical and experimental demarcations. So we actually maintain belief in falsified propositions by continuing to use the theories, though with a restricted domain of relevance.
This emphasis on
sequences of theories means that Lakatos thinks science does not consist of a linked series of singular propositions subject to experimental refutation, it instead consists of a transforming sequence of hard-cores and auxiliary hypotheses over time, and temporally demarcated hard-core + auxiliary hypotheses composites are termed 'research programs'. It is research programs which are the active unit of science, not propositions and their falsifications; for it is research programs which modify theories, make predictions, reject propositions, and change hard-cores.
This, then, gives an account of scientific revolution; rejecting a hard core, as in the case of Mercury, yields a novel research programme, Einsteinian mechanics. But in distinction to Feyeraband, these research programs are not incommensurable; they do not differ in terms of a conceptual scheme; they can differ in scope of application; and scientific inquiry admits research programmes that, strictly speaking, have contradictory hard cores. Simply because research programmes have a native context of application in which that hard core makes sense.
The relationship between hard cores and auxiliary hypotheses also gives a vantage point from which to view the demarcation problem; what is the difference between pseudoscience and science? Lakatos treats this as a condition of scientific practice; as a property of a research programme; rather than simply turning on the falsifiability of propositions. He also gives a practical account of what it means to treat a hard core as non-falsifiable.
As seen with the Mercury example, scientists can adjoin an auxiliary hypothesis to block rejection of the hard core. If a research programme routinely does this, when their research consists mostly of positing auxiliary hypotheses to protect their hard core, that research programme is called
degenerate. When they are not degenerate; when science is progressing through the research programme; they are called progressive. The science/pseudoscience distinction is then transformed to the progressive/degenerate distinction, and from the relationships of singular propositions to falsification to the relationship of research programmes to their propensity for non-rejection of the hard core through the perpetual creation of ad-hoc auxiliary hypotheses. Freudian psychology and Marxism have this character for Lakatos as they do for Popper, though for much different reasons which we have discussed.