Game sends signal - vibrator receives signal and vibrates. It works the same as any other bluetooth device.
Apparently enough for NLT to add it to his games. I think it is just the start for a new production line of toys featuring sex games. Possible that in an open world sex game one user could stimulate another player through the game. Toys and apps already exist for that.
I can imagine that e-thots will jump on it and offer their "service" in exchange for some coins - coins the player has to buy in-game through microtransactions.
Maybe in the future NLT comes up with "events" where hired porn actresses will stimulate and make you cum through one of his games.
As you can see there are many ways to make money from it.