To cheat at slots using a magnet, you could spin the reels and then use a strong magnet on the outside of the machine to stop them spinning when you saw your winning combination. Cheaters would then remove the magnet and claim the payout.
One common method is the use of optical sensors to scan the bill for specific security features, such as watermarks, security threads, and color-shifting inks. The machines may also use magnetic and infrared sensors to detect the magnetic properties and infrared marks present on legitimate currency.