Google Analytics is enabled by including a tracking code in the template of your website. This way, Google's indexing bots can see every page of your site and tell you all kinds of information about the traffic you're receiving on those pages.
Humans, Not Bots
Google Analytics looks at your website from the "outside" and attempts to closely approximate the experience of a human user. Consequently, many people notice that their numbers tend to decrease when transitioning from using Urchin to Google Analytics. This is not a bad thing; it's much more realistic. Remember, though the numbers may be lower, they're just numbers. What's more important than big numbers is accurate data.
By the way, Google allows you to add IP addresses to a filter in your analytics account so that your numbers are not skewed by your own traffic on the website. If you haven't set this up, you should (see Slide 6 in the SlideShare presentation I included for more on this). It would be a real bummer to go on thinking your website is crazy popular because you spend hours clicking through it every day.