During recording, an audio signal causes current to flow through the coil producing a magnetic field in the gap, as shown by the blue lines of force in the diagram.
As the audio signal varies in amplitude and frequency so does the magnetic field.

The tape consists of a plastic film coated with a material that is magnetised by the field as it passes over the gap.
As the magnetic field varies in strength so does the magnetism stored on the tape.

During playback the tape passes over the same head. (it is called the record/playback head).
This time the magnetism stored on the tape induces a voltage in the head coil.
This  voltage is amplified and used to drive a loudspeaker. 

During record, the two sections of the switch are placed in the record position.
The audio signal from a microphone etc is amplified by the record amplifier and connected by the top switch to the record/playback head.

The bias oscillator has two purposes.
One is to remove a form of distortion produced during recording.
The oscillator is connected to the record/playback head via the top switch to do this.

The second purpose is to remove any magnetic patterns previously recorded on the tape.
It does this by randomising the magnetic pattern on the tape by means of an erase head.
This head is of similar construction to the record/playback head.
The erase head is connected to the oscillator by the lower switch during recording.
The tape passes over the erase head before it reaches the record head.

The oscillator frequency is about 100kHz.

A power supply to provide DC to the various stages and the motors is required.