I was wondering how these in car lap timing system work. Do they get a transponder signal from somewhere on the track or what. can someone explain?

Usually you have a sender that you set up on a tripod next to the track that sends an IR beam across it. The transponder in your car sees the beam at the same place each time and stops your lap time at that point.

The club I usually go out with sets up senders for the Intercomp and Hot Laps system. Both are fine except the Intercomp is a bit smaller and seems to be less suceptable to false readings, like being set off by glare from the sun or something.