The airbags rest in the shoulder pads, similar to some cars that have airbags built into seat belts. Ford and Mercedes-Benz both use the technology. The Maxi-Cosi AxissFix Air is meant to work when a child grows large enough to use a forward-facing seat, though the design allows it to be used as a rear-facing seat, too.
The AxissFix Air uses ISOFIX (LATCH) connectors and can detect an accident and inflate the airbag in fractions of a second. When the airbag inflates, it helps reduce forward motion on child's head and neck.
Like with any safety system, there's always a concern of the technology causing further injury — bruises from seat belts, Takata airbags, etc. Check out the video above for a slight overview of how the system works and what Maxi-Cosi has done to reduce further injury. The seat is on sale now for just under $800. It's a lot to ask for a car seat, but that's the sort of precious safety you can't put a price on.