It actually doesn’t, not at all.
At the heart of a see-and-say toy is a plastic disk with grooves carved in it and a metal needle, exactly like a record. It has one groove per picture on the front of the toy, and turning the arrow changes which groove the needle sits on.
Pulling the string winds up a spring inside the toy, and as it unwinds, the needle travels along the groove, playing the sound encoded in the wiggling of the groove.
https://entertainment.howstuffworks.com/see-say.htm
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