Electroencephalography is a technique used to record electrical activity along the scalp in order to determine levels of brain activity, and is useful for research and diagnostic purposes. The technique was introduced by German psychiatrist Hans Berger in the 1920s.
Metal electrodes are placed evenly at points across the scalp, often using a cap which helps with placement. Activity (differences in voltage) is typically read off and digitalized, and then presented as activity waves within certain wavelengths. The EEG method does not read off action potentials directly, but rather waves of activity from the dendrites of active pyramidal cells. Their activity can be somewhat synchronous, and can be detected at the scalp due to the particular conductance properties of the brain, the scalp, and the membranes between them.
Different frequencies, as measured with EEG, correspond with different brain states such as sleep stages, waking states and coma. In addition, EEG can indicate brain activity during specific types of cognitive tasks, aspects of muscular movement (including preparing for muscular movement) as well as the processing of informational patterns in local brain structures, such as the coding of visual features in the visual cortex.
Source:
Binder, M. D., Hirokawa, N., & Windhorst, U. (Eds.). (2009). Encyclopedia of neuroscience. Berlin: Springer. 1067-1072