Two magnets are used to generate a magnetic flux around a coil. The borehole casing is also within the magnetic flux. Where the casing is of uniform thickness there is no variation in the flux and no voltage induced in the coil. However where there is a variation in the casing thickness (due to a collar or corrosion) a voltage is induced in the coil as the tool travels past the anomaly.
This voltage is converted to a pulse frequency in the CCL interface circuit and transmitted to the surface.