An E-meter is an electronic device manufactured at the Church of Scientology's Golden Era Productions facility, and is used exclusively by the Church. It is used as an aid by Dianetics and Scientology counselors and counselors-in-training in some forms of auditing, the application of the techniques of Dianetics and Scientology to another or to oneself for the express purpose of addressing spiritual issues. The device is formally known as the Hubbard Electrometer, for the Church's founder, L. Ron Hubbard. 
The Church of Scientology restricts the use of the E-meter to trained professionals, treating it as "a religious artifact which can only be used by Scientology ministers or ministers-in-training. It does not diagnose or cure anything. It purports to measure the mental state or change of state of a person and thus is of benefit to the auditor in helping the preclear locate areas to be handled."
The E-meter measures changes in the electrical resistance of the human body by inducing a tiny electrical current through the body. According to Scientology doctrine, the resistance corresponds to the "mental mass and energy" of the subject's mind, which change when the subject thinks of particular mental images (engrams).
E-meter sessions are conducted by Scientology staff known as auditors, and its use is covered in advanced Scientology training courses. In session the preclear holds a pair of cylindrical electrodes ("cans") connected to the meter while the auditor asks the preclear a series of questions and notes both the verbal response and the activity of the meter. Auditor training describes many types of needle movements, with each having its own special significance.
The meter has two control dials. The larger dial, known as the "tone arm", adjusts the meter bias, while the smaller one controls the gain. Auditors manipulate the tone arm during an auditing session to keep the E-meter needle on a marked reference point.
(Source: Wikipedia, for the text, and the book Understanding the E-Meter, by L. Ron Hubbard)