There are two types of resistance and braking mechanisms on indoor cycles - Magnetic Brakes and Friction Brakes. This section deals with bikes that have friction resistance.
A bike that uses friction resistance uses a friction pad that comes into contact with the flywheel. The harder the pad presses against the flywheel, the harder it is to pedal.
The resistance level is controlled by a lever or knob on the frame of the bike that you can move when cycling - so if you feel like simulating a hill climb part way through your exercise programme you move the level or turn the knob (depending on the model) to move the friction pad closer to the flywheel which increases the resistance. Now you feel like you're cycling uphill! The reverse is true - reduce the resistance by moving the friction pad away from the flywheel and it's much easier to pedal.
Friction pads wear over time and will need to be replaced. However, friction resistance bikes are generally less expensive than their equivalent magnetic counterparts.