Here is some info...
http://electronics.howstuffworks.com/question487.htm
The stylus (needle) rides in a groove that is cut with the same signal/wave that you would see on a scope - the original waveform. The needle/stylus generates a signal between coils (the cartridge)and that signal is passed onto a phono stage for amplification. That is a simple answer but I am only a vinyl junkie and not an engineer. I know this - It works really well.
If you have not had a chance to sit down and spend some time listening to a good vinyl set-up, do yourself a favor and find someone who has one. Sit yourself down and enjoy. If you want to come out here to Montana and listen to mine you can spend a whole day listening. No charge...
Todd