The SkyScout uses a patented technology that combines 3 main components:
1. GPS receiver: collects information from GPS satellites to get the exact time, date & location.
2. Object Database: database has celestial coordinates for 50,000 objects.
3. Gravity & directional sensors: tell the SkyScout its angular orientation.
Once the SkyScout knows the time, date, location, and its orientation, it finds an object using its database of sky object coordinates.
See this website for an internal breakdown of the SkyScout.