How do pregnancy tests work? What is the exact mechanism?

Basically speaking, when you are pregnant there is a specific hormone one produces that gets expelled through ones urine. When one urinates on the stick an indicator that changes color through chemical reaction reveals whether one is pregnant or not.

long process = pregnancy test detect hormone hcg=human chorionic gonadotropin.  the test dipstick consist of absorbent material and at the bottom tip it is coated with anti-hcg antibody (binds to hcg only) labeled with a substance to make it pink.  when dipped in urine, urine migrates via capillary action carrying the pink anti-hcg antibody.  if hcg is present, the pink antibody will bind the hcg.  
the test window of the test consists of two narrow bands of antibodies fixed in place.  the first band consist of different type of anti-hcg antibody which will bind to hcg that is already complexed with pink antibody and make pink stripe.  if no hcg present, pink antibodies will not bind to first band since they only bind to hcg.  second band in test window is a "control."  there is excess of pink antibodies in that strip and they continue to migrate up the strip past the first strip.  second band consist of antibodies that bind to pink antibodies whether or not they are bound to hcg, to make another pink stripe.  if no pink stripe appears in control window = test didnt function properly

your body starts producing a pregnancy hormone when you are pregnant, this hormone is in everything your body produces, including your urine simply speaking, a chemical compound is applied to a spungy substance. this chemical compound undergoes a chemical reacting when it comes into contact with the hormone. the chemical reaction makes it change colour.