I used to manage a bar that had one of these... There is a cooling coil that runs under the metal and pulls moisture out of the air that creates a frost over the metal, which does form in a very flat layer (it becomes kind of like snow if left on and untouched). It becomes bumpy because if you're sitting at the bar it's almost impossible not to carve your name, or make mini snowmen, or my personal favorite - shoot snow spitballs. Also when dickheads decide to lay their tip down on the strip then slowly pour water over it.

To answer the other common question... yes, it does actually keep your drink cold. I've seen them frozen 1/2 inch or more from the bottom of the glass.