The magneto is the white block in the following photo:
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The idea behind a magneto is simple. It is basically an electrical generator that has been tuned to create a periodic high-voltage pulse rather than continuous current.
An electrical generator (or a magneto) is the reverse of an electromagnet. In an electromagnet, there is a coil of wire around an iron bar (the armature). When you apply current to the electromagnet's coil (with a battery, for instance), the coil creates a magnetic field in the armature. In a generator, you reverse the process: You move a magnet past the armature to create electric current in the coil.
This magneto consists of five parts:
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When the magnets fly past the U-shaped armature, they induce a magnetic field in the armature. This field induces a small amount of current in the primary and secondary coil. What we need, however, is extremely high voltage. Therefore, as the magnetic field in the armature reaches its maximum, a switch in the electronic control unit opens. This switch breaks the flow of current through the primary coil and causes a voltage spike (of perhaps 200 volts). The secondary coil, having 100 times more turns than the primary coil, amplifies this voltage to approximately 20,000 volts, and this voltage feeds to the spark plug.
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