An eddy current is a local electric current induced in a conductive material by the magnetic field produced by the active coil. This local electric current in turn induces a magnetic field opposite in sense to the one from the active coil and reduces the inductance in the coil. When the distance between the target and the probe changes, the impedance of the coil changes correspondingly. This change in impedance can be detected by a carefully arranged bridge circuit.
The eddy currents are confined to shallow depths near the conductive target surface. Their effective depth is given by,
where f is the excitation frequency of the circuit, µ is the magnetic permeability of the target material, and s is the conductivity of the target material.
The target material must be at least three times thicker than the effective depth of the eddy currents to make the transducer successful. This is because the transducer assumes that the eddy currents are localized near the surface of a semi-infinite solid, and the actual eddy current amplitude decreases quadratically with distance.