Arccos sensors are shot impact detectors. Once installed on your clubs, they detect impacts when you hit a golf ball.
Each Arccos sensor also has a unique transmitter inside of it and these transmitters pair to your phone. Each club is paired with your phone as a separate and unique device. This allows the Arccos app to know which club you used when you hit a shot.
When a sensor detects an impact, it sends a signal to the phone's microphone. That signal says something like, "I'm a 7-iron and I just hit a shot." When the phone receives that signal, it uses its GPS capability to make a note of exactly where that shot occurred. The Arccos Caddie app then overlays that data onto a map of the hole you're playing. Arccos knows where the fairway and green and bunkers are located, so it knows how to categorize your shot as a drive, approach, chip, putt, etc.
Because Arccos Caddie utilizes the GPS functionality of the phone to know where you hit your shots from, it is imperative that you keep the phone on your person when you play.