An induction hob works on the principle of Electromagnetic induction, basically there is a large coil of wire that sits just below the hob surface that has a varying electric current passing through it (AC). When a pan of mettalic construction is placed on the hob there is a varying magnetic field set up (induced) in the pan, because the pan is one large area of metal there are currents of electricity set up in the pan known as Eddy currents (see my user name that's where it's come from) these eddy currents create heat by means of the I2R (current squared times resistance) equation also known as iron losses, normally these losses are avoided in electrical engineering as they can cost a lot of money in wasted energy but in this application the energy is used to heat the pan instead. The heat is controlled by varying the frequency and intensity of the magnetic field and is quite controllable. If you used a ceramic pan however it would not heat up (unless there was metal in it's construction) as there would be no currents set up in the pan.