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its kinda like the new wii controllers and those step counters that people that run or walk use. it has an actual accelerometer in it that moves in side a circuit board and the speed it moves detrmines the amount of force.
I actually have something like this but mine is a G-Tech Pro SS. The one I have does 0-60, 1/4 mile, HP, TQ, and g's. I paid about 200 for it. The gtech plugs right into your ciggarette lighter. I have used it and with the mods I have and the weight of my car It showed my HP was 155 and Tq was 148. I took my car to a dyno place in NJ and they did 3 pulls for me. all 3 averaged 155-160hp and 150-155TQ. The gtech works great as long as you calibrate it correctly.