The altimeter is operated by atmospheric pressure. The higher you go, the less the atmospheric pressure outside; the altimeter reads the pressure against a spring to operate a dial that uses three pointers to allow it to read accurately up to altitudes higher than the airplane can ever fly.
The altimeter must be adjusted for the barometer reading, which aviation people call the "altimeter setting." There is a small window in the dial face and a knob for the altimeter setting.
Many modern jet airliners also have one or more radar altimeters that indicate the height above the ground in absolute terms at low altitudes. Recent Boeing models actually talk to you: "Two Hundred… One Hundred… Fifty… Forty… Thirty… Twenty… Ten…" on short final. After "Ten," you are supposed to hear "bumpety-bump" as the mains touch down.
This is done with electronics about as complex as a cop’s radar gun, mounted in the belly. There are other kinds of radar altimeters, but they are all rare. The atmospheric (or "barometric") altimeter is by far the most common.
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