Pointer on the screen.

You just hover the pen around 5mm above the tablet to move the pointer and tap it to click.

I've never actually taken one apart to find out but i guess around the tablet are lots of small coils that generate a small electromagnetic field around it. On wacoms this allows the pen to draw a small current to power it and also lets the tablet work out where the pen is. You click when you compress the pen nib.