When a bill is inserted into a money changer machine, it disrupts a light beam from within the machine. This action triggers the motor to pull the bill into the money changer. The machine then begins a procedure by which it first makes sure the bill is actual currency and then determines the denomination of the bill.
With a computer chip and measuring devices, the money changer checks the length, width and thickness of the bill. If the bill is not the exact length and thickness it should be, the changer will reject it and refuse to give you any change.
The sensors that evaluate the bill are so sensitive that even an old, wrinkled bill usually will not pass this authenticity test because it will not measure precisely the same as a crisp, new bill.
After the machine measures the bill's width, length and thickness, it optically scans the bill to determine if it is a one, five, or ten dollar bill. The machine makes this decision by "reading" how much ink is in different places on the bill. The U.S. treasury department uses specially manufactured ink that has unique magnetic properties.
The machine's optical scanner measures this magnetic ink. And because a one dollar bill has a different ink pattern than a five or ten dollar bill, the computer inside the machine is able to differentiate between these denominations with a quick scan.