Liquavista screens rely on electrowetting. Each pixel contains water and a droplet of dyed oil. When an electric charge is applied to the outside surface of the pixel, it becomes hydrophilic. The water is attracted to the surface, forcing the oil to the side and making the pixel take on the color of the lower surface of the pixel, which is white in this case. When the charge is reversed and the surface becomes hydrophobic, the pixel takes on the color of the dyed oil.
Michael Kanellos/CNET News.com