It's a modular system based around three lens holders with movable lens panels. These are adjusted to change the region of sharp focus produced by the lens. It's like an extremely crude version of the tilt movements provided by large-format studio cameras. A range of simple lenses can be dropped into these holders, and you choose the lens which creates the effect you're trying to achieve.
Lensbabys are far to simplistic to accomodate the auto-exposure and aperture control systems used on modern D-SLR bodies, so it means a return to manual focus and manual exposure. It takes a good deal of practice and experimentation to work out how the lens movements affect the image, and the results aren't to everyone's taste, but Lensbabys do have something of a cult following.
