XRAY - Model racing cars

Jilles will be able to explain this better (he works at AMB) but essentially the transponder is a piece of equipment that emits a short code (the transponder number) for a very short distance (typically a few centimeters).

Tracks that use transponder based lapcounting will have thin electrical wire under the track (or over it in some cases) that is called the timing loop. The wire goes across and about 25cm later comes back again. Both ends are attached to the timing equipment at the track which has hardware and software to receive and interpret the transponder signal when it crosses the timing loop. Each time the transponder crosses it is counted as a lap and the time the transponder passed is counted as well giving the info needed to count both laps and individual lap times.

I believe AMB is indeed the current market leader but there are other companies that offer similar systems too. Interestingly the systems we use in RC have formed the basis for the systems used to perform the lap counting at formula one and many other full scale racing events. AMB systems are also often used at karting tracks.