The iPhone 6 NFC sensor strip is at the top of the phone. Credit cards appear in your Passbook. They are secured using a secure enclave in the phone. The credit card number itself is never stored. A security code is sent over the wire, meaning the card number is completely separate to the transaction.
Apple Pay works with the top bank issuers that handle 83% of the credit card purchase volume.
The system also works online. It brings NFC one tap experience to online shopping — no credit cards or long forms. Tap and pay and it — supposedly — just works. There is also some third-party app integration, such as with OpenTable, Groupon and Target.
There is an Apple Pay API so more third-party developers can integrate in future. The system launches in October, alongside an upcoming iOS 8 update.
Apple Pay will also work with the Apple Watch, although specific details (like Touch ID integration) are currently unclear.