From Cookipedia

Dried baking yeast

Yeast is used in baking as a leavening agent, where it converts the fermentable sugars present in the dough into carbon dioxide. This causes the dough to expand or rise as the carbon dioxide forms pockets or bubbles. When the dough is baked it "sets" and the pockets remain, giving the baked product a soft and spongy texture.

The use of potatoes, water from potato boiling, eggs, or sugar in a bread dough accelerates the growth of yeasts. Salt and fats such as butter slow down yeast growth. The majority of the yeast used in baking is of the same species common in alcoholic fermentation.

A wild yeast found on plants, fruits, and grains is occasionally used for baking. Sugar and vinegar are the best conditions for yeast to ferment. In bread making the yeast respires aerobically at first producing carbon dioxide and water. When the oxygen is used up anaerobic respiration is used producing ethanol as a waste product however this is evaporated off during the baking process.

For further information about types of yeast, use this link

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