Not very well in most cases. Knocking, using a level or other straightedge to find butt joints, using rare earth magnets to find screws, or looking for shadows is way more effective.
edit: you can come at me, but every experienced tradesman I know, myself included, can find studs faster, more reliably, and on more different surfaces (eg: not just 1/2″, 16″ studded drywall) than any finder on the market. But most of us still have one or two.
At varies based on the stud finder but a lot of low/mid quality units use electricity. The drywall has a level of resistance/capacitance to electricity that the stud finder measures. It is basically how hard it is to push electricity through the wall. When the finder flies over a stud, the capacitance/ resistance changes and the stud finder senses that.
More advanced units use radar based technology.
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