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Photo from wikipedia http://en.wikipedia.org/wiki/Quartz_clock

Crystal oscillator

A crystal oscillator is an electronic oscillator circuit that uses the mechanical resonance of a vibrating crystal of piezoelectric material to create an electrical signal with a very precise frequency. This frequency is commonly used to keep track of time (as in quartz wristwatches), to provide a stable clock signal for digital integrated  circuits, and to stabilize frequencies for radio transmitters and receivers . The most common type of piezoelectric resonator used is the quartz crystal, but other piezoelectric materials including polycrystalline ceramics are used in similar circuits.Quartz crystals are manufactured for frequencies from a few tens of kilohertz to tens of megahertz. More than two billion crystals are manufactured annually. Most are used for consumer devices such as wristwatches ,clocks,radios,computers, and cellphones. Quartz crystals are also found inside test and measurement equipment, such as counters,signal generators, and oscilloscopes.

Photo from wikipedia http://en.wikipedia.org/wiki/Crystal_oscillator

MECHANISM

I. The quartz oscillator receives an electrical charge from an integrated circuit, which gets its power from the watch battery (or, in the case of a battery-less watch, the poser storage cell). The electricity makes the quartz vibrate, or oscillate, at the rate or 32,768 times per second. (Quartz crystals can be cut to vibrate at a huge range of frequencies. the bigger the piece, the slower it vibrates.)

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