There’s real magic in this wand.  The wand transmits a constant navigational beacon signal to the four rotor pods, each containing a Bluetooth receiver.  By comparing the signal shift from at least three pods in combination with data from the flyer’s on board accelerometer, gyroscope and digital compass, the flyer can determine it’s altitude, distance, vector and speed relative to the wand’s operator to a resolution of <1m.  This indoor positioning system is known as Bluetooth Trilateration, where three sensors can pin-point a fourth node in 3D space. This is in contrast to Signal Triangulation, which is based on signal strength variation and wouldn't work at such close ranges.
An accelerometer and gyroscope housed in the wand sense the gesture’s dynamic qualities: acceleration, duration, tilt and rotation.  This information is transmitted to the flyer and is compared with the relative positioning information determined by Trilateration. A directional flight control path for the flyer is then generated and executed.

source: http://tam.unige.ch/assets/documents/masters/bekkelien/Bekkelien_Master_Thesis.pdf

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Wondu has three main components: the flyer, the wand and the base.  The three included batteries are stowed and charged inside the wand and flyer when docked. Batteries can be easily swapped during play to triple flying time.

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To make the Wondu a fun, interactive, magical companion, the Flyer needs to know where it is in relation to the Wand. With a combination of gyroscopes, accelerometers, and three bluetooth transceivers, the Flyer can determine it’s distance and altitude from the Wand.  

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The flyer’s bio-inspired lightweight cage protects the user from the rotors (and vice versa…) and provides a tough, flexible bumper for a variety of flying environments.