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Replacement modules are available for many small engines to take the place of their original point type ignition system. These can be designed in several different ways but all must emulate the behavior of the point type ignition replacing just the magneto coil/pole piece assembly and without requiring alterations to the flywheel.
If you are really curious, check out U.S. Patent #4163437: Transistor ignition circuit. There are diagrams of several possible variations on the basic circuit. (The US Patent & Trademark Office currently has a search facility with free access to complete text and graphics.)
Not that any of this profound knowledge does you any good for repair as these things are usually quite well potted and impregnable.