How does an AIRSPEED indicator work?

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Airspeed is a measurement of the plane's speed relative to the air around it. The airspeed indicator is used by the pilot during all phases of flight, from take-off, climb, cruise, descent and landing in order to maintain airspeeds specific to the aircraft type and operating conditions as specified in the Operating Manual. The pitot (pronounced pee-toe) static tube system is an ingenious device used by airplanes and boats for measuring forward speed. The device is a differential pressure gauge which was invented by Henri Pitot in 1732.

Airspeed indicators work by measuring the difference between static pressure, captured through one or more static ports; and stagnation pressure due to "ram air", captured through a pitot tube. This difference in pressure due to ram air is called impact pressure.

Internal mechanism of an airspeed indicator

The static ports are located on the exterior of the aircraft, at a location chosen to detect the prevailing atmospheric pressure as accurately as possible, that is, with minimum disturbance from the presence of the aircraft. The open end of the pitot tube, usually mounted on a wing, faces toward the flow of air or water. The air speed indicator actually measures the difference between a static sensor not in the air stream and a sensor (Pitot tube) in the air stream. When the airplane is standing still, the pressure in each tube is equal and the air speed indicator shows zero. The rush of air in flight causes a pressure differential between the static tube and the pitot tube. The pressure differential makes the pointer on the air speed indicator move. An increase in forward speed raises the pressure at the end of the pitot tube. In turn, the air pressure pushes against a flexible diaphragm that moves a connected mechanical pointer on the face of the indicator. The indicator is calibrated to compensate for winds in the air current.

Airspeed indicators are calibrated for a sea level standard atmosphere. When the pressure/temperature combination yields a density altitude higher than sea level, the airspeed indicator displays a lower airspeed. Conversely, if the density altitude is below sea level (which is not uncommon in the Winter months at lower elevations), the airspeed indicator reads a faster airspeed.This brings you to ICE T.

The speed that you read right off the face of the airspeed indicator is indicated airspeed. That's the I in ICE T.
The C in ICE T stands for calibrated airspeed, which is indicated airspeed corrected for position error, which typically means that the static port is located in a place where its measurements are not accurate in certain flight configurations.
The E in ICE T stands for equivalent airspeed, but it might as well stand for expensive, because it reconciles an error that only becomes significant in airplanes flying faster than 300 knots and/or higher than 25,000 feet. The error is called compressibility error.
Finally, you come to the T, which is true airspeed. True airspeed is equivalent airspeed corrected for non-standard pressures and temperatures (density altitude). It is the actual speed at which the airplane moves through the air, and the only thing standing between it and ground speed is a correction for the effect of the wind.

Thus the AIRSPEED INDICATOR is similar to a speedometer in a car. It shows the speed (in knots) of the airplane traveling through air.