Some pair up with your phone and download traffic data over the mobile phone network – they're usually subscription based. Some use TMC, which picks up data encoded into the FM radio signal (Classic FM in this country).
I've had both, current one does TMC and both are only really useful when telling you something horrendous has happened and a road is shut. Invariably if it's reporting "busy" or "queuing" traffic you can bet the surrounding roads (which it doesn't know about) that it tries to route you on will be awful too.
Not as good as FM/RDS traffic reports through your stereo, but quite nice when you're listening to something and don't want reports cutting in all the way through rush-hour.