There are two main types of wattmeters. Electrodynamometers (electromechanical) and digital. Electromechanical meters are described below.
The theory of electrodynamometers was developed by Elihu Thomson and Thomas Edison in 1888. Until then the only meter available was a zink plate meter (very unreliable and inaccurate) and a light meter which basically detected if the lights were on and turned on a clock if they were. When power is consumed, (such as in a light bulb) a current flows through the conductor. This current flow also produces a magnetic field which can be picked up using voltage and current coils within the electrodynamometer. When current flows it is induced onto the coils which causes a rotor to roate inside the stator casing of the meter. The rotation of the rotor causes the display dials to count up at certain values per rotation. This is all configured by the supplier of the meters or utility using magnets within the meter.