We presume you are flying with a GPS receiver and have selected a correct waypoint ( 3 letters and 3 numbers ) by activating the "goto" function; this is your goal.
Now you must distinguish between two phases :
Phase 1- While circling up in a thermal before starting the final glide.
There is an averager vario inside the instrument with a fixed time constant of 30 sec, measuring your average climb rate in the thermal. There is a table, based on your polar, with nominal speeds for all possible climb rates (Tangent calculation). Also, for every speed there is a specific L/D ratio. Next step: Whenever the nose of your glider is pointing towards goal ( + / - 20 degrees) the instrument measures the difference between airspeed and groundspeed to get the wind-influence. Now the instrument can calculate L/D ratio over ground towards goal at the required McCready speed. Because the variometer knows it's altitude and the GPS is sending the distance to goal information and the altitude of the goal we are able to calculate the arrival height over or below goal. So when the height over goal says "zero" and you start your glide at a speed which keeps the height over goal at zero, you can be sure to arrive in the shortest possible time.
Phase 2 - During the final glide towards goal.
Assume a pilot had an average climb rate of 2 m/s in the last thermal and left the thermal when the target symbol appeared. If the pilot now would fly with the speed of the best L/D ratio, he would arrive much too high over the goal (he could have left the thermal that much lower); he actually should fly at the McCready speed, which keeps arrival height over goal at zero. Changes in vertical movement of the airmass along the way are also cancelled out by flying a bit faster or slower as the instrument indicates.
The instrument constantly checks for changes of windspeed and constantly calculates your arrival height, based on your polar, your speed, the actual wind influence and last but not least your altitude.
The theory says: if you fly with a McCready ring setting of 2 m, you should continue flying straight even if you are climbing at 1 m/s. The moment you glider starts climbing, the acoustic automatically changes from the McCready sound to the usual climbing sound. When your climb rate exceeds 2 m/s you can start to circle. Now suppose that you fall out of the thermal and try to find the lift again; during this period it would be annoying if the McCready sound started immediately again. For this reason there is an adjustable time window 1 .... 30 sec (Setmode No.13) between end of climbing and the automatic start of the McCready sound.