Not a newbie-level question at all...
The tricky thing about this script is getting it to interact properly with the system environment. There are a couple of problems: 1) you can't get at the history list from inside the script because "history" is a shell built-in and the ".bash_history" file isn't kept up to date, and 2) you can't create aliases from inside the script because there's no way to export aliases out to the calling context.
The first problem is addressed by taking the history list as input. (But not simply as STDIN, because then you couldn't prompt the user for input.)
The second problem is solved by using the script in a "command substitution" context -- surrounded by backticks or $(). The only thing that gets printed on STDOUT is the name of the file to which the script writes the "alias foo='bar'" commands. That filename is what the bash "source" builtin sees. So, you don't have access to STDOUT for the interface (it doesn't even show up on the terminal): you have to use STDERR instead. Definitely a kludgy hack, but it works fine for this purpose.