The wheels are driven by a ratchet alternately powered by your weight standing on the pegs and your butt sitting on the seat. Basically you lift yourself up then sit yourself down and the bike scoots forward.
The physics-inclined of you will understand why this locomotive technology is no longer with us. The amount of energy required to lift your self up for half of each cycle is considerably higher then, well just about any other for of propulsion.
Poor energy usage aside, I love this thing. I would think that any steam-punk aficionado would love to own this thing. Unfortunately the seller is aware of its value and has an opening bid of $599.