We already took apart the iPad during the teardown, so here's a peek of all the fun stuff from the inside...

The sleep sensor. This is the little sensor that reacts to the Smart Cover's round magnet for turning on/off the iPad 2's screen.

This row of magnets clamps the Smart Cover tightly to the iPad 2 (on the right side). Note that the magnets have their polarity displayed, and that they alternate in polarity: + - + - .

The alternating polarity of the magnets in the iPad 2 is complemented by the opposite alternating polarity of the magnets in the Smart Cover (- + - +), ensuring that the Smart Cover always sits in the same orientation.