How do magnets work?

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erh, I don't think most people know (or at least don't think abut it)

They generate magnetic field (forces of attraction or ..whatever the opposite term is in English) It's got something with electrons lining up and stuff
 
Magnetic fields exist because somewhere electrons are moving. Electrons in the iron atoms are orbiting the nucleus, and each electron is also spinning on its axis. Most materials are not strongly magnetic, because their magnetic poles (caused by spinning electron) are either randomly oriented, or they pair in opposite directions.
If the electrons in an atom (or a molecule) create equal numbers of north and south magnetic poles that cancel each other out, the atom has no magnetic poles. If you bring a magnet near such an atom, the magnetic field causes the electrons in the atom to move. Moving electrons create a magnetic field, and the field they create is opposite to the original magnetic field. The atoms move away from the magnet. Materials that act this way are called diamagneticmaterials. The effect is very weak, even in bismuth, which is the most diamagnetic material.
If the electrons in an atom do not create canceling magnets, the atom has a north and a south pole. Normal room temperature causes these atoms to bounce around, and their magnetic poles are randomly oriented. If the atoms are inside a magnetic field, some of them will align with the field. Others will have too much energy and will still bounce around. The amount of energy depends on the temperature, so the colder the atoms are, the more of them will align with the field. Materials that act in this way are called paramagneticmaterials. Paramagnetic materials are attracted to magnets, but the effect is weak unless the temperature is very low. Paramagnetic materials also exhibit diamagnetic effects, but the paramagnetic effect is stronger unless the temperature is very high. Aluminum and platinum are paramagnetic.
In four elements (iron, nickel, cobalt, and gadolinium) the magnetic poles of the atoms stay lined up even at temperatures that thoroughly randomize the poles of other elements. These elements are calledferromagnetic.
In the four ferromagnetic elements the magnetic effects are caused by the electrons in the inner orbits. They would align with their poles opposite except for a principle of quantum mechanics called the Pauli exclusion principle. This principle (very loosely interpreted) says that electrons cannot occupy the same space unless they have opposite spins (which means opposite magnetic poles). Two atoms in an element like iron might share an outer electron. This electron will try to align the poles of the inner electrons to be opposite the outer electron. This makes the inner electrons have the same orientation. The inner electrons are thus all aligned the same way, and contribute the magnetic field.

In many paramagnetic materials, the atoms pair up with their north and south poles in opposite directions, canceling each other out. These materials are called antiferromagnetic. Chromium and manganese are antiferromagnetic.
Some materials, called ferrites, are similar to antiferromagnetic materials, but consist of two different magnetic components, one of which is stronger than the other. This makes them act like ferromagnetic materials, and they are attracted to magnets. The iron ore we have been using is an example of a ferrite. It is a mineral called magnetite, and the natural magnet lodestone is made out of it. The name for this configuration is ferrimagnetism, after the ferrites. Ferrites find many uses in electronics, because they are magnetic, but do not conduct electricity like iron does.
Just as electricity travels through some materials better than others, magnetism travels with ease through some materials, and has more difficulty traveling through others. The ability of a material to conduct magnetic flux is called the relative permeability of the material. It is measured relative to the permeability of air, which is assigned a permeability of one. Iron and steel have relative permeabilities between 100 and 9,000. Ferrites have relative permeabilities between 50 and 3,000. The relative permeability of a material can be thought of as the ease with which a material can be magnetized. The higher the relative permeability, the easier it is to magnetize a material.
The lines of force of a magnet, as a group, make up the magnetic flux. The stronger the magnet, the more lines of force it has, and thus the more magnetic flux it has. A typical household magnet has between 100 and 1,000 lines of force. One line of force is called a maxwell. Materials with high relative permeability allow more lines of flux inside them than does the air around them. The flux is thus concentrated in the material. The measure of concentration of flux, measured in lines of force per square centimeter, is the gauss. One gauss is one line per square centimeter.
The earth's magnetic field at the Earth's surface ranges from less than (0.3 gauss) to over (0.6 gauss) The average magnetic field strength in the Earth's outer core was measured to be 25 Gauss, 50 times stronger than the magnetic field at the surface.
The superconducting electromagnets used in magnetic resonance imaging range from 5,000 to 15,000 gauss.
The field is similar to that of a bar magnet. The Earth's magnetic field is mostly caused by electric currents in the liquid outer core. The Earth's core is hotter than 1043 K, the Curie point temperature, above which the orientations of spins within iron become randomized. Such randomization causes the substance to lose its magnetization.
Convection of molten iron within the outer liquid core, along with a Coriolis effect caused by the overall planetary rotation, tends to organize these "electric currents" in rolls aligned along the north-south polar axis. When conducting fluid flows across an existing magnetic field, electric currents are induced, which in turn creates another magnetic field. When this magnetic field reinforces the original magnetic field, a dynamo is created that sustains itself. This is called the Dynamo Theory and it explains how the Earth's magnetic field is sustained.

For a permanent magnet we want a magnet that has a strongly concentrated magnetic field as well as a magnet that will stay magnetized. To understand how we measure a permanent magnet's strength and permanence, it is helpful to picture how to make a magnet.
Start with a piece of iron or another ferromagnetic material. We will assume that it is not magnetized when we find it. To magnetize if, we place it in a magnetic field created by another magnet. We will place ours in a field created by an electromagnet, so we can vary the strength of the field and see what happens to the iron.
When the field strength is small, the number of lines of force concentrated in the iron is also small. As the field strength rises, more of the tiny magnets in the iron (called domains) align with the external field. The number of lines of force in the iron rises with the field strength. This continues until all the magnets in the iron line up with the external field. At this point we say the iron is saturated. It cannot hold any more lines of force. As we raise the external field strength, we see no further increase in the number of lines of force in the iron.
Suppose we now start reducing the external field strength. The heat inside the iron at room temperature jostles the tiny magnetic domains inside, and some of them readjust so they do not align with the external field. But some domains stay stuck, aligned with the field. When we completely remove the external field, these stuck domains are left, and we have a permanent magnet.
Hope thats helps. :)