The magnetic fields measured with MEG are derived from synaptic activity. Neurones connect via synapses, which are chemically mediated junctions between two nerve cells. When neurones are active, the flow of neurotransmitter chemicals changes the electrical current into the recipient neurone, and affects the cell's electrical potential. This is referred to as a change in the Post Synaptic Potential (PSP), and can be excitatory (EPSP) or inhibitory (IPSP).
The summation of the neural currents produced by neural activity is what is indirectly observed using MEG. MEG measures the magnetic field associated with this electrical activity. However, SQUIDs are unable to sense the magnetic fields from such electrical activity in just one neurone. Approximately 50000 adjacent neurones need to be active at the same time to generate a collective magnetic field that SQUIDs are able to detect.
A schmatic of how this can be seen in (Figure 1.5). In the top left image, the white elipse represents neural activity. The black arrow in the top right image represents an electrical current related to the neural source. In the bottom left image, we see the magnetic field that is generated by the moving electrical current. And the final image at the bottom right schematically demonstrates how this magnetic field may be recorded by sensors close to the scalp.