To set up a nym, one creates a PGP keypair and submits it to the nym server, along with instructions (called a reply block) to anonymous remailers on how to send a message to his real address. The nym server returns a confirmation through this reply block. He then sends a message to the address in the confirmation.
To send a message from the nym, one adds a few headers at the beginning, then signs it with his nym key and encrypts it to the nym server key. He sends it to the nym server, normally through anonymous remailers so that it cannot be traced. The nym server then sends it out, with the From: address being the nym.
When the nym server gets a message addressed to the nym, it appends it to the reply block for that nym and sends it to the first remailer in the chain. That remailer then sends it to the next, and so on until it reaches the user's real address. It is good practice to add instructions to encrypt it on the way, so that the message one gets cannot be matched to the one the nym server sent.
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