It uses BINARY.  The simplest counting system in the world.  It's either there or it's not.  We have assigned the value of 1 and zero to represent when it is there and when it is absent, but it also applies to "TRUE" and "FALSE", or "YES" and "NO".  AND, it is the counting system used by computers since the beginning.

It all starts with 1 (one).  A single binary output could be… say your front porch light.  When it's "ON", it equals 1.  When it's "OFF", it equals "ZERO".
So how can you count?  Let's say you want to count in binary how many cars go down your street.

So you turn off the porch light and watch for cars.  AHH.  The first car goes by, and you flick on the light. That equals "ONE" car.  So far, so good.
UAH OH, here comes the second car… now what?  We'll use the back porch light as the second column for our binary numbers.  As the second car goes by, you turn OFF the front porch light, and go turn on the back porch light (in math it is called a 'carry').

OK, so the front porch light equals 1, and the back porch light equals 2…  THAT'S Pretty simple.
UAH OH, here comes the THIRD car.  The back porch light equals 2, and 2 plus 1 equals 3, so as the third car goes by, you turn the front porch light on. (1 + 2 = 3).
OH NO, here comes the FORTH CAR and the front and back lights are BOTH ON.…  Lets use the PATIO LIGHT, as the forth car goes by, turn off the front and back porch lights and turn on the patio light.  The PATIO Light equals 4.  When the fifth car goes by, you turn on the front porch light (4 + 1 = 5).  When the sixth car goes by, you turn off the front porch light and turn on the back porch light (4 + 2 = 6).  For the seventh car, all three lights are on (4 + 2 + 1 = 7).  For the eighth car we will have to turn on the GARAGE light and turn ALL the other ones OFF.
Pretty simple!  The ninth car is garage and front porch, the tenth car is garage and back porch,  the twelve car is patio and garage (8 + 4 = 12), etc...