Not exactly an estimation, more of an extrapolation. It senses the change in torque in your pedal stroke, and calculates cadence from that.

I found cadence with the powertap to be reasonably accurate when you were putting out a fair amount of power. At lowe r power levels it tended to skip around a lot. So doing fast pedals (high cadence, easy gear) it wasn't so good for. Otherwise it was reasonably acurate.