The spool that the orange strap wraps around, can turn freely on the shaft. It can also move side to side. When the motor/transmsission turns, it drives the shaft. When the spool is shifted to the right, as in the picture, the bolt on the side of the spool is engaged with the bolt on the shaft, so the motor drives the spool. To release the winch, the pneumatic cylinder pulls the lever, which moves the spool to the left, so the bolts disengage.
The orange strap connects to the kicker arm, which has "springs" made of latex tubing pulling it away from the winch.
http://www.youtube.com/watch?v=rId6Lnw-Hl4
http://www.youtube.com/watch?v=YFmG_b4B-BE