The CS209 is designed to detect the presence or proximity ofmagnetic metals. It has an internal oscillator that, along with its external lc resonant circuit, provides oscillations whose amplitude is dependent upon the Q of the lc network. Close proximity to magnetic material reduces the Q of the tuned circuit, thus the oscillations tend to decrease in amplitude.
Stud-finder - schematic

The decrease in amplitude is detected and used in turn on LEDl, indicating the presence of a magnetic material (i.e., nail or screw).

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