... It's got two thin test strips inside that look almost exactly like the cheap pregnancy test strips from Poundland. There are teeny weeny lights inside and a little sensor that detects whether a line has appeared or not and that is what tells the display whether to display positive or negative!
We did some extra research and basically the two strips contain different amounts of the chemical that reacts, this seems to be how it can estimate how many weeks you are.
See images - first one is with the strips attached and the second one shows it with the strips removed - the four little white rectangles on the left seem to be tiny LED lights, and the third picture just shows the display on the other side.
Basically it seems we are paying for a teeny tiny sensor to read whether a line has appeared on a test strip, rather than straining our eyes to see one! Other than that, it doesn't seem to be doing anything magical that the cheapo ones can't do.
Sorry if it looks yukky... this was a positive test that has been lying around in DHs office for about 4 months until he got round to dissecting it 
Super nerdy MNers may be interested in the patent which explains how it works in more scientific detail!