Well, here's the basic overview of how the guitar works:
When you play the guitar, you cause the strings to vibrate at a specific frequency, depending on how they are tuned. This vibration, in and of itself, is audible, but by itself it is not loud enough to be effective as a source of music. Fortunately, the electromagnetic pickup "picks up" the vibration and converts it into an electrical signal. This signal's intensity is adjusted by the volume knobs on both the guitar and the amplifier. The signal is also amplified by the amplifier by one of several slightly different amplification circuit types, and sent through a speaker that produces a sound. This sound is considerably louder than that of the string by itself; with more dramatic amplification circuits such as those found at rock concerts, the sound can be so loud that it can be heard from a great distance quite easily.