Briefly:
The Note has a Wacom dual digitizer, a first in a mainstream smartphone. That means is supports both capacitive multi-touch and active pen input from a precise EMR digital pen and a digitizer layer under the screen. Wacom is the world leader in pen based computer technologies and first developed this technology for Tablet PCs for very accurate handwriting level pen use that works with touch displays.

Details:
Almost all other phone styluses are just capacitive and therefore no more accurate than your finger. The Galaxy Note's active pen uses Wacom's EMR patented technology. EMR which stands for Electo-Magnetic Resonance, which requires no internal power to generate a signal on the pen-side that enables the pen coordinates on or above the screen to be detected (the display provides the power rather than the pen). The Note's screen surface incorporates a sensor board that detects the pen's movement. Weak energy is induced in the pen's resonant circuit by a magnetic field generated by the sensor board surface. The pen's resonant circuit then makes use of this energy to return a magnetic signal to the sensor board surface. The digitizer board under the screen detects information on the pen's coordinate position and angle, as well as on its general operating condition including speed and writing pressure, etc.

With EMR Technology, the sensor unit is installed behind the display screen. Because the sensor does not cover the front of the display, the quality and brightness of the displayed image are not compromised.

Wacom's sensors are high precision and high resolution, which together make it possible to detect even small hand-written letters. The sensor traces the movement of the human hand and reproduces such "human" elements as the feel, force and ambivalence of the pen tip.

The dual capacitive multi-touch and EMR active pen technology is called Wacom Feel It and was developed and honed over 2 years on major ( HP, ...) Tablet PCs. The Galaxy Note is the first use in a smart phone.

Source:XdaDevelopers