How does it work?

This is a good way to describe what it happening:

"[RISUG] caused significant damage to the acrosome and its contents, indicating loss of functional ability of sperm."

http://www.popline.org/docs/1508/273621.html

The gel that gets inserted is able to stop the sperm from functioning while still allowing it to go through. This is a big difference from Vasectomy where all the sperm is stuck inside and the male body starts a war with it. In the end a man's fertility is reduced due to the body fighting it and slowing production. This can have other side effects.