Look here for information on the Shimano Nexus 7 \8 hubs.
http://www.sheldonbrown.com/nexus-mech.html
Basically, the hubs are like the old 3 speeds but with seven or eight gears. All of the "works" are within the hub. So, you have one sprocket at the pedals, one at the rear!
I own the Townie 8. So far I love it. I did have problem with the bottom brackett, but my bike shop resolved this for me no charge.
Good Luck!
ksk
8/01