Electronic edge finder: how do they work?

[Lee Roberts]

Especially if the spindle has ceramic bearings no ?

[BillTodd]

that means the circuit is tip, workpiece, table, column, head, chuck... surely not... a tad tenuous at best...

Yep, that how those ones work (I have a Sony probe for my magnescale DRO that works exactly the same)

You can get touch probes that are effectively sensitive normally-closed switches (usually three switches in series at 120' to each other) relying on movement of the probe to open the switches and the closed position of the switch as a position reference.

Nice home-brew design here:
http://tmonnot.free.fr/Fraisage/Palpeur3D.htm