There are two types of Faller Road System Vehicles: Digital and Analog. This webpage provides a good explaination of the Analog system: http://www.gaugemaster.com/articles/product-spotlight/faller-car-system.html
The analog system works fine and with the addition of control magnets, it can provide switchable routing and the ability to stop vehicles. The stopping of vehicles is accomplished using a reed switch embedded in bottom of the vehicle which interrupts the flow of electricity to the motor when it passes over an electromagnet within the road. Switchable routing is accomplished using a solenoid that causes the steering magnet to be diverted to a different route. There are traffic control modules which activate all of these features. Analog system vehicles are available in N and HO scale.
The digital system uses a constellation of "satellites" suspended from the ceiling that can triangulate the position of a number of vehicles using ultrasound and communicate with them individually using a WiFi system. This system is explained in great detail in this document: https://www.faller.de/xs_db/DOKUMENT_DB/www/allgemeines/FALLER_Car_System_2017_EN.pdf
The digital system is expensive so many have tried to find alternative methods of controlling the vehicles. These alternatives are explained on this page: Alternatives