A speed bag is a piece of equipment often used by boxers. It is a drop-shaped ball that is suspended from a platform. The bottom of the bag should be at chin level, and you should stand at a comfortable distance--not to far, not to close. You are ready to begin using your speedbag, but first you need to learn some technique.
Hitting the bag
You will often hit the ball with the bottom of your vertical fist (the part of your first at your pinky's knuckle). You can set yourself up to perform normal punch combinations (e.g jab, cross), but it becomes easy to lose control. The idea is to get a rythym going, therefore the traditional repeated punches with the tip of the fist is preferred. Practice hitting the ball and seeing if it comes back to you in a straight line.
Getting a rythym
After you are comfortable hitting the ball in a straight line, try to get a rythym going. Hit it, let it rebound off of the back twice, and hit it again. Start slow, and build up speed. You should be doing this in a hit-rebound-bounce-rebound-hit... pattern. You will hit the ball, and it will bounce off the back, bounce off the front, bounce of the back once more (the rebound), and then you will hit it again.
Eventualy, you will be able to do the above pattern (2 rebounds) very easily. Switch hands, do one hand, and then try to do a 1 rebound pattern. Hit the ball and immediately hit it again when it comes back to you. Alternate hands, do one hand, etc. At this point, you simply need to increase speed and endurance (the length of time that you can do this). As I said before, you can also make up combinations. Try doing jabs and crosses and turning that into a rythmic routine. Keep working and you will improve your hand speed, your coordination, and your endurance.