Dynojet makes one of the most popular chassis dynos. It has a rolling wheel that the car drives on to provide load. There are also engine dynos that connect to directly to the engine (engine is out of the car).
'01 Stock Spectra Blue
'94 12psi Turbo Miata
here is how a dynojet works, it takes 2 drums, for a standard dynojet, and measures how fast you accelerate the drums, using your wheels and engine to turn them. it only starts to measure, after a button is pushed, and will stop measuring after that button is pushed again.
through some math formulas, it takes into account the speed the drums are accelerated, through a magnetic pickup, below the drum wheels, and then calculates torque, from that it can calculate horsepower. the way it knows the rpms, is because a sensor is put over one of your sparkplug wires, like on a timing light, and it measures the rpms from that. they way it knows your amount of cylinders, and how many times your ignition fires per 1 engine revolution, is that the operator inputs that stuff into the computer before a run is attempted.