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This device is a proximity sensor that detects the presence of a magnet. The reed switch is actually a mechanical contacting switch, although the mechanical contact is usually enclosed and not noticeable. Internal to the reed switch there are two ferromagnetic contacts. These can be either normally open or normally closed.
The presence of a magnetic field introduced by bringing a magnet into the proximity either attracts the two contacts in a normally open reed switch or repels the two contacts in a normally closed reed switch.