Basically...
An electrical signal runs to an "actuator" on top of the shock, the actuator is essentially a switch that rotates, and this rotation (of 45 degrees) moves a pin/lever on top of the shock. This movement of the pin changes the valving rate by closing off holes in the "Soft" valving mechanism/plate.
larger holes pass the (nitrogen gas) shock fluid faster in the chamber, with less damping, allowing more travel of the shock piston. Smaller diameter holes ( Or the closing off of some of them) in the valve allow less fluid through at a slower rate, increasing firmness and damping.
Make sense?