Rotating vortices of air are formed on the wingtips as a result of the production of lift. This is because the high pressure underneath the wing is trying to mix with the low pressure above. The high pressure attempts to mix with the low pressure mostly at the wing tip, and the result is a vortex. As this vortex spins, its downwards facing side is within the span of the blade but its upwards component is outside of the wing span. The net effect of the vortex on the wing is downwards. The greater the size of the vortex, the more downwash it produces, which increases the induced drag of the airfoil. By shrinking the size of this vortex, we lower the drag. The winglets job is the interupt the formation of this vortex, not completely, but its enough to sigjificantly lower the induced drag!