Powering a low voltage device from a two wire light circuit
Figure 1. Triac waveform with exaggerated turn-on delay.

I suspect that to power this switch in-line they have to steal power from the line. There are a few possibilities that I can think of:


Use a triac to delay switch-on until the voltage across it has risen far enough to charge a capacitor for power through the rest of the cycle.
Skip a mains cycle periodically and switch off the load momentarily. This will apply full voltage across the switch and would allow internal PSU recharge. 
Put back to back diodes or Zeners in series with the load to drop some voltage across the switch. This has the problem of power dissipation in the switch.


I think the second option would be likely to give noticeable flicker so it is unlikely.