A computer differentially adjusts rotor speeds to keep the device in the air flying in a circular path at the end of a tether, much like a kite in the wind. The super-high winds you find in the troposphere spin the turbines rapidly enough that there is no need for gearboxes. The electricity generated by the turbines is transmitted to the ground via a reinforced composite tether that anchors the kite to the ground.
One problem: The U.S. Federal Aviation Administration has restricted the altitude initially to below 600 m. Joby is working on a test system for that altitude able to generate 30 kW. Plans are to then scale up to a 100 kW prototype and then to an initial set of turbine arrays generating 300 kW.
If the tether breaks the kite would have enough smarts on-board to land itself. Similarly, it would also gracefully come to earth in the event of gale-force winds or periods of no wind at all. And if a few of the turbines die, the kite can still remain aloft.
If everything goes well, Joby hopes to begin manufacturing its kites in 2012.
More info: http://www.jobyenergy.com/