Different types work different ways. But one of the major types is carbon film. A carbon film is placed on top of some support material. The carbon film has a uniform resistance from end to end. Two connectors are attached to the film, one on each end. The resistance between these two conductors is the total value of the potentiometer. The third terminal, which is between the other two, is connected to a wiper. As the wiper is moved across the film, from one side to the other, the resistance value between the middle terminal and the two outer terminals changes. The value is (usually) linerly proportional to the amount the wiper is moved across the film. If the wiper was postioned about half way between it's two extream positions, there would be a resistance of about half the value of the potentiometer between the center terminal and both end terminals.
A useful configuration for a potentiometer is to connect the one outside terminal to a voltage source, say a 9 volt battery, and the other to the negative of the battery, set at ground (earth). The middle terminal will then varry in voltage from 0 volts when it is moved clostest to the gound terminal, to 9 volts when it is moved clostest to the high voltage terminal.
BEEF 41