Whenever you bring coils and magnets together (in the proper orientation and moving with respect to each other), magic happens. In this case, it is the Edisonian magic of lighting a light bulb. Turning the crank rotates a coil inside of the large U-shaped magnets. This creates a constantly changing flux (a flux in flux?), which by Lenz's Law induces a current within the coil. This induced current can be used to power the light bulb.
Dashingly handsome physicist not included with the unit.