So, bored on my flight so doing the write-up again
I recently did electromagnetics research in my final year of undergrad (earlier this year), so I'm actually sorta qualified to explain this

(This should go on the wiki after a bit of editing/comments, and getting/making properly licensed pics)
(I really should do this for the HP inductive switch as well as I have full schematics for my keypad

)
While I regret a little bit naming this switch mechanism (will be explained) as it is not integral to how the switch works. I didn't fully understand how the switch worked. I knew that it was like the Honeywell Hall Effect sensors, but not quite the same, and that for some reason the signals were pulsed. But using the name magnetic pulse is not completely incorrect, as calling it a magnetically pulsed keyboard is accurate. (And magnetic pulse just sounds cool

)
Before I get into explaining the magnetic pulses, I need to explain how the ferrite works in relation to the magnet and the driving current used for the sense line, which are electrically disconnected.
This switch, according to wikipedia, is a true hall effect mechanism. It is
Ferrite toroid Hall effect current transducer. But it differs from Honeywell Hall Effect switches, as controller does not measure the strength of the magnetic field coming from the magnet. If I were to give this a name, I'd call it a magnetic valve switch (I'll be explaining why after I get through the technical details).
But for those of us with high school physics (and especially those of us who didn't pay attention; don't worry I didn't either

), hall effect doesn't mean anything really.
In laymans terms, a hall effect sensor is a device that can measure the strength of a magnetic field, outputing a higher voltage with a higher magnetic field.
Honeywell Hall Effect switches use a semiconductor transducer (i.e. microchip) to output the voltage. Obviously for the RAFI switch, there is no semiconductor, just a ferrite with two separate metal "loops" (electromagnetics term).
So, the RAFI switch has three key magnetic components: wire loops, magnet, and a ferrite toroid.
The wire loops are responsible for carrying electrons (current), the magnet for providing a strong magnetic field, and the ferrite acts as a magnetic field transfer medium (magnetic field flows more easily through than through air).
It's necessary at this point to understand the relationship between the wire loops magnetic fields.
A power generator uses a "changing" magnetic field to "induce" a current on a loop of wire. This is done by having a loop of wire rotate in the prescence of a magnetic field. The magnetic field causes electrons to flow in specific direction (remember the "right-hand rule"?), this flow of electrons is called a current and for a current.
The inverse is also true. Any wire that has a current moving through it will generate a magnetic field, the strength determined by the current (more right-hand rule

).
The RAFI switch utilizes both of these effects in order to build a magnetic "circuit".
When a current is passed through the drive loop (line) of the switch, a magnetic field is generated around the loop and since magnetic fields flow through the mediums of least work, flows around the ferrite (direction determined by the right-hand rule).
This magnetic field causes a flow of electrons to occur on the sense loop, creating a current from the displacement of electrons (giving rise to a measurable voltage).
This is how the magnetic circuit works using the ferrite toroid as a magnetic field transfer mechanism. Yet there are still two more things to cover. Why is the signal pulsed, and what is the purpose of the magnet.
The magnet is the reason I'd call the mechanism a magnetic "valve". When the magnet is far away from the ferrite (or the field is not directly ideal), the circuit works as explained above.
Yet, when the magnet is moved close to the ferrite the magnetic field of the magnet "overpowers" the magnetic field generated by the single loop. This is important as the magnetic field from the magnet is different in this case. It is much larger, encompassing the width of the ferrite and thus does not flow completely around the toroid circle.
Since the magnetic field is not flowing in a circle around the toroid it does not encircle the wire loop, and thus does not displace electrons (i.e. no current).
Thus when the magnet is brought close enough (and in the correct direction) it completely nullifies the current from the drive line (loop), acting like a magnetic "valve" for the electrical signal.
(I really should have a pic here, but I'm pretty sure I'd have to draw one...Daniel bug me later, once I have a real mouse, I'll make an SVG)
Now, from the discussion so far, we having everything needed to make a switch for a keyboard. What's the point of the "magnetic pulse" (or electrical pulse)?
Actually this part makes lots of sense

Just think of what happens when you scan a keyboard matrix

Each key is scanned separately, and this is exactly what's happening here, and thus the keyboard is "magnetically pulsed" in order to read each of the switch states.
And there you have it, an explanation of the ITW (RAFI) magnetic pulse keyboard patent. ITW has a bunch of different variants, I can think of at least 3 right now, I might have 1 or 2 more examples but I'd need to double check my pics/records.