The engine brake usually called a "Jake" brake is internal to the engine and operates using your engine oil supplyto divert oil to small cylinders within the Jake. When activated the solenoids will hold the exhaust valves open and use the drag of the engine to slow down the vehicle using what is called parasitic drag.
My interpretation is a little different. The mechanism actually leaves the exhaust valves closed as normal during the compression cycle until the piston reaches top dead centre and then allows them to open. This turns the engine into an air compressor and the compressed air blasts out (hopefully through the muffler) making the distinctive noise. This compressing the air requires energy and this is what provides the retarding force. Without the mechanism the compressed air would drive the piston down giving zero net braking.
Without some sort of auxiliary braking, a normal diesel engine is in itself a much poorer retarder under zero throttle than a normal gasoline engine. This is because the diesel engine has close to zero losses due to the air movement through the engine and the main retardation comes from friction, water pump, fan, and alternator. A gas engine has a highly restricted air intake under zero throttle and this acts in exactly the same way as the external exhaust brake often fitted to diesel engines as a cheaper and less effective option to the internal engine brake.
Tony Lee - International Grey Nomad. Picasa Album
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RVs. USA - Airstream Cutter; in Australia - MC8 40' DIY Coach conversion & OKA 4x4 MH; in Germany - Hobby Class C; in S America - F350 with 2500 10.6 Bigfoot camper