It works by spreading a signal that would normally occupy a certain amount of spectrum over a much broader amount of spectrum. Both are allowed by FCC rules. In frequency hopping, the signal dwells momentarily on one frequency, then hops to another, then another in a pseudorandom sequence that eventually repeats itself. A receiver must hop at exactly the same time to exactly the right frequency to be able to receive the signal. FCC rules require that the band be divided into a certain number of frequencies and that the hopper must use a certain number of these frequencies.
Direct sequence is very different.
The binary data in the sequences are referred to as chips, and the ratio of chips to original bits is referred to as the spreading ratio, or gain, of the system. FCC rules require a minimum spreading ratio or gain. Some wireless LANs are based on frequency hopping, some on direct sequence. Direct sequence allows higher throughputs, although such designs may cost more and use more power. There is almost a holy war about which type of spread spectrum is better, though mobile designs today tend to use frequency hopping.