The transponder puts out a coded signal that is received every time you cross the loop/bridge. Its the software that records your lap times.

Some places you have to supply your own... check with the track you want to race at.

Yes they are pricey.... but it makes your race day easier.... can be transfered to other cars easily... and as long as you don't damage it, probably the only thing in this hobby that will hold its value.... possibly even increase.