This always baffled me until I found the following explanation in dear old Wikipedia!

An induction cooker uses induction heating. A ferromagnetic or ferromagnetic coated pan is placed on top of an induction coil. The heat is generated from an electric current induced by the electric coil. This type of hob does not work with non-ferromagnetic cookware, such as glass, Pyrex, aluminium, ceramic and most stainless steel, nor with ferromagnetic material covered with a conductive layer, such as copper-bottomed pans.

Advantages to Induction Cooking

• Induction cookers are faster and more energy-efficient than traditional hobs
• The risk of burning accidents is reduced because the hob itself only gets marginally hot (due only to heat conducting down from pan).
• No heat is lost to the air directly from the hob, keeping the kitchen cooler
• The hob can detect when cookware is removed because the voltage drops. This way it switches itself off automatically

The heat from the pot is transferred to the food by conduction, but very little heat is transferred to the actual hob surface. After boiling a pot of water, the surface of an induction stove is warm to touch but not so warm as to burn a person.