>>656612This crappy drawing will hopefully explain it, although i do mine a little differently by having a slightly proud-sitting drain bung so that the tub can only hold a few mm of water in the bottom and the rest goes into the sand (I do have the option of blocking the bung off at any time)
To answer simply though, yeah it's just a capillary action bed really, except you can also root cuttings and such straight into the sand as well which is a plus, and since the roots can easily be taken out of the sand when the seedlings get too big for the cells; you get a lot less transplant shock.
