What are they for? : Well they promote camaraderie among the players and help them hone their skills.
Can you allow only certain people involved? : Well yes if you are the organizer you can choose who will participate. It your talking about Daily Tournaments everybody can join them as long as your playing in the proper room and on the proper time.
How do you award prizes for the winners of said tournaments? :They put the cards in your private sell and you have to buy them for 50 clintz. For Daily Tournament prizes are awarded automatically.
Can the creator join in the tournament?: Yes
Can just anyone create a tournament?: Yes anyone who has resources can.