From the Waterpebble website:

"The clever device monitors water going down the plug hole when you shower.  Memorising your first shower and using it as a benchmark, Waterpebble then indicates, via a series of ‘traffic lights’ flashing gently from green through to red, when to finish showering.  Each time you shower Waterpebble automatically fractionally reduces your shower time helping you to save water without needing to think about it."