Excerpt from:
http://ratcliffe.co.za/articles/piezo.shtml - I have various clips there too.
What are piezo pickups?
Piezoelectric pickups are best known as the undersaddle pickups used to amplify acoustic guitars. Sensing mostly the vibrations coming directly from the strings themselves, they give a relatively pure acoustic tone. While the lack of of the acoustic's body resonance and tone make the piezo sound a little sterile in comparison to a mic'ed acoustic guitar, the excellent resistance to feedback makes them ideal for live amplification.
Unlike the magnetic pickups used for electric guitars, piezos are very good at sensing higher frequency sounds, making them ideal for acoustic guitar applications, which have a higher proportion of the upper frequency sound than their electric counterparts. As they work with pressure rather than magnetism, they are also well suited to non-magnetic strings, such as bronze or even nylon.
How do they work?
Piezo pickups are formed from a crystal or ceramic material, which produces electricity when stressed. In our application, the stressing comes from string vibration. The piezo element senses the small changes in pressure as the string vibrates, and produces alternating current.
In an electric guitar piezo saddle, the piezoelectric element is embedded in the saddle itself, rather than under it as with most acoustic pickups. Due to piezo crystals and ceramics being brittle, the string itself cannot rest directly on the element, so manufacturers either fit the element between a piece of metal and the rest of the saddle, or in the case of the Graph Tech GHOST saddles, embed the element in the material of the saddle itself.
Why use them on an electric guitar?
Good question, Tonto. Primarily to make it sound like an amplified acoustic guitar. Less obviously, but more importantly, to use piezo and conventional sounds blended together - more on this later in this series of articles. There are some advanced applications like MIDIguitar and guitar modelling too.