The Soviets would sit outside the embassy, either in another building or in a van. From this remote location they would aim a radio transmitter at the great seal. The bug inside would receive this signal and transmit voices in the room on a second, higher frequency. It did all of this with no standard internal components. No resistors, no tubes, no traditional capacitors, or the like. There were capacitive properties to the mechanism. For instance, a capacitor is formed between the diaphragm and the tuning peg of the device.
Receive tuning (if it can be called such) was achieved by the precisely cut antenna. The RF carrier transmitted by the Russians would be received at the antenna and travel into the body of the device which was a resonant cavity. That resonant chamber was capacatively coupled to the thin conductive diaphragm which formed the microphone.
Sound waves would cause the diaphragm to move, which would vary the capacitance between the body and diaphragm, forming a condenser microphone. It is important to note that the bug didn't transmit and receive on the same frequency. According to Peter Wright, the excitation frequency used by the Russians was actually 800 MHz. The cavity would resonate at a multiple of this base frequency, producing the 1.6 GHz output seen by Bezjian.
How the Soviet Union Spied on the US Embassy for 7 Years