RIP Webby

Your brain knows when it needs to sleep by measuring a chemical which builds up during the day. When you sleep, this chemical, adenosine, gets cleared out - and then once you're awake, it builds up again, slowly. The more of it you have in your brain, the tireder you become. Then eventually you fall asleep, and your brain clears the adenosine out and resets it to zero for the next day.

Caffeine basically blocks your brain's ability to measure this chemical. There isn't an easy way to ELI5 this part, but your brain has these things called "receptors" which this chemical connects with, and that's how the brain knows how much of it there is - caffeine gets in between the chemical and the receptors, preventing them from connecting together. So even though you have a bunch of this chemical in your brain because you've been awake for a long time (or you didn't get enough sleep last night), caffeine falsely tricks your brain into thinking "wow, there's basically no adenosine here at all, I must be properly well rested and not have any need for sleep right now!" This leads to a clear-headed and alert state of mind, as your brain isn't trying to get you to wind down for sleep because it thinks you don't need any. Think of the receptors like smoke detectors - caffeine stops them from detecting the smoke.

The reason you get a headache from withdrawal is because unfortunately, eventually your brain cottons on to the trick caffeine is playing, and it creates new receptors to measure the levels of adenosine. So it's like "Ah, you're blocking my receptors to stop me measuring it! No problem, I'll make new ones, and there won't be enough caffeine to block all of them". This is why, over time, you need more caffeine in order to feel the same effects. The brain simply adjusts to the caffeine and tries to return your sleep cycle to normal. The headache arises because when you don't drink caffeine, your brain falsely believes you're a lot more tired than you are, because these receptors are measuring all of the adenosine in your brain - but your brain had become used to not measuring much of it at all, because the caffeine was blocking it. So now, it thinks you're suddenly absolutely wrecked, because out of nowhere, it's detecting a whole bunch of adenosine that it wasn't detecting before.

As regards permanent changes, we don't really know. Abstaining from caffeine for several weeks causes a "reset" of sorts - after a few weeks, your brain realises that most of the extra receptors it created are surplus to the amount of adenosine you actually have, and it starts getting rid of them again. In theory, there's no reason why this would change over time, but it's not fully understood or known right now, so nobody can say for sure.