It's a sensor based system that goes off a number of factors. One of them is wheel spin, another is throttle position, g-forces being applied and which direction, steering wheel angle relative to direction of travel and so on.
It's pretty sensitive. And it reacts VERY quickly. I'll have to drive it on an icy parking lot come winter just to see how/what it does in really poor conditions - lol.
I will say this about it too, having it on all the time, it allows you to think you're a better driver than what you are. Try doing the same thing with it off, and it gets pretty freaky very quickly - I still play with mine off, but, I don't try and do anything like drifting or powersliding around a corner anymore.
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