How does this electronic wall switch work with only a 2 wire circuit.
-Switched off: It draws current through the bulb. The current it draws is not enough to visibly light up the bulb. Certain type of LED bulbs may cause trouble with this switch though, as they prevent the switch from drawing enough current.  

-Switched on: In creates a voltage drop of a few volts to keep the electronics active. The drop in brightness is not noticeable to the average human. 

Regular phase-cut dimmers work in the same way.