Water is heated as it moves through coils in a tankless heater.
Tankless water heaters heat water as it comes from the source as it travels to its destination without storage in a holding tank. An open valve in a sink or tub signals a valve in the unit which, in turn, opens a circuit or switch to "fire up" electric or gas energy to heat the water as it travels through the serpentine coils in the unit. The heat source fires only when a valve is open to demand water and when the valve is closed, the energy source is switched off.
In order to work efficiently, the unit should be installed as close as possible to the place the water will be used so that less cold water that stands in the pipes has to be pushed out ahead of the hot water as it comes from the unit. Solve the problem of "long distance" water flow by installing units near each appliance that will use hot water to cut down on water usage.
Electronic controls signal the heating unit to begin.
Although tankless water heaters can last twice as long as traditional storage tank water heaters, they have several unique features that will require careful maintenance. Depending on water hardness (Consumer Reports recommends tankless heaters only for areas with water that has a hardness rating of less than 11 grains) you'll need to flush the lines of your tankless unit periodically to prevent calcium build-up that can affect efficiency by insulating as the water runs through the pipes.
The solenoid switch that controls the firing mechanism is more active in a tankless unit and, although not likely to fail, can be an expensive repair. Other control elements like sensors and fans must be maintained, but tankless heaters are remarkably trouble-free provided they've been chosen and installed correctly. Most tankless owners protect their investment with periodic professional inspections to make sure that their "high-tech" water heater keeps operating as efficiently as the day it was installed.