I think they include a one pixel transparent image that is stored on their server. When your email loads that image, they know. Something like that anyways!
Hubspot released a freemium tool to the world today called Signals. It is a chrome extension that essentially pops up a notification on your desktop when your email is read.
Is this a good thing? If this gets widely adopted it could potentially change how we treat email. Dynamics might shift with information like this. 'I know you know etc'
Don't forget that plenty of people are a lot more productive with some kind of structure in place. No amount of 'skinny jeans wearing' gen Y'ers will change that fact.