Well, basic operation is something like:
1. There is a grid of wires under the surface that are used as a bunch of individual antennas. These wires are spaced, say, half an inch apart.
2. The pen transmits a signal which is received by the wire grid.
3. Because the received signal is stronger the closer it is to an antenna, the tablet measures the amplitude of the signal received by each of the grid wires and compares them. Thus it can,at a gross level, determine which pair of wires the pen is in between, or which wire it is directly over in both x and y coordinates.
4. By doing a high-accuracy comparison of the signal received by the two closest wires in each coordinate, it can tell proportionally how close the pen is to one or the other (the signal is 23% stronger in wire A than in wire B, so the pen is 23% closer to wire A than it is to wire B) (yes, I know the math is significantly more complex than that). Using this method, they can get thousandth of an inch accuracy.
5. The Pen changes the signal it transmits depending on which buttons the user is pressing, the tablet can detect this signal change and thus report the button states.
6. There is a pressure-sensitive device in the tip of the pen that measures the force the user is pressing with. Once again, the pen changes the signal it transmits based on this force reading. The tablet picks up the change and thus can report the force.
I hope this is sufficient; if you have more questions, go ahead and ask.
IANAWE (I am not a wacom employee).
/frank
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