the short version is that you have a electronic key fob that sends out a signal that is received by the bike. if it does not receive the signal, it will not allow the starter to crank. also, if you have the siren installed, it will start screaming. its a completely passive system, you don't have to push any buttons or anything. just walk away from the bike and it arms, bring the fob close enough, it disarms. there is also an override mode should you lose your fob, or your batteries die, or if there is some rf interference. you enter a 5 digit code via your left turn signal/right turn signal switches.
some people really don't like the system. i like it just fine. never had a problem with it. most of the people that have had problems have never bothered to learn how to use the override and/or have never changed their code from default.