This confusion is easiest to resolve by learning the many-worlds interpretation first, and then, once everything is clear, transferring the intuition to other interpretations that require more philosophy. In the many worlds interpretation, you view the wavefunction as a giant wave. But it isn't a wave associated to one particle, or a different wave for each particle, but a wave over all possible configurations of all the particles together. The electron and the detector are both together waving through the space of all possible configurations, of all possible worlds. This is true in any interpretation--- it is just a property of quantum mechanics. The difference in interpretation is mostly in how philosophically real you say the other worlds are. The many-worlds interpretation does not discriminate between the world we see an all the other worlds quantum mechanics said we could have seen.
When you have an electron that is spread out, and it interacts with a detector, the detector is put in a different state depending on the position of the electron. The configurations of the detector are then said to be entangled with the electron, an this means that the electron is no longer as spread out, when considered relative to any one given configuration of the detector. This is the process of "collapsing the wavefunction".
The many-worlds interpretation explains the wave-function collapse completely, along the lines suggested by Heisenberg in the analysis of particle tracks in a bubble chamber. There is nothing required beyond plain old quantum mechanics. But there is an issue, in that everything stays in a superposition of all possible worlds, while our experience is of only one world. Whether this is just a property of our experience, or whether this means that quantum mechanics is not the final theory, I don't think is definitively settled. I could imagine it going either way, although I tend to think this is a property of our experience, and quantum mechanics is complete.