They operate the same way ice cubes in a soda drink do: as the temperature rises from atmospheric friction kinetic energy is converted into heat and the ablative material undergoes a phase change[?] (vaporises from solid to gaseous). This dissipates spacecraft momentum (aerobraking) and absorbs and/or diverts heat which is carried into the slipstream and away from the spacecraft.
All of the early spacecraft used ablative technologies to assist with the transition from high orbital speeds down to aerodynamic regimes where a spacecraft can be flown or parachuted to safety.
Conservation of energy principles apply. Further information applicable to detailed analysis can be found in physics and chemistry articles.
wikipedia.org dumped 2003-03-17 with terodump