As an investor: What's the point of doing a convertible note?

I am talking about the convertible notes used recently by the latest batch of YC companies.<p>Is it just to get in the deal?<p>Do convertible notes actually pay the coupon on them, or does it just accrue and convert to equity?<p>If so, what is the downside protection to the investor if the company goes bust? Can they call the bond/note in a bankruptcy?