Do you mean, how does the physical card reader work, or what the encoding into punches is?
You'd think the card readers would be optical, shining lights through the 80x12 possible holes in the card and using photocells on the other side of the card to detect the lights. There were such machines, but the ones I remember used springy metal contacts on one side of the card making contact with a grounded metal plate on the other side. I say "you'd think" because this mechanical connection gave rise to jams that could damage the card reader and rip the card itself to shreds. (Immature people punched cards with all 80x12 possible holes punched, which were almost guaranteed to wreck the card reader when read.)
Back in the days when pretty much all computers came from IBM, they were leased, not sold, and they came with an accessory: a human being, the "customer engineer," who was an IBM employee who spent his (sorry, this is the '50s we're talking about) time at the customer's offices. If the card reader jammed while reading your card deck, you weren't allowed to try to fix it yourself; you had to go find the CE to fix it. So this happened to me (age 14 maybe?) one day, and I dutifully found the CE, who came in, looked at my card stuck halfway into the card reader, looked at me, glared, said "If I ever catch you doing this, I'll kill you," grabbed the card and yanked it back out. I think the card itself wasn't even damaged, let alone the card reader, so they weren't all that delicate, but it was definitely possible to ruin those spring switches that way, kind of like backing your car over those evil vehicle diodes with the springloaded mini-spikes that would puncture your tires if you went over then in the wrong direction.
Okay, on to the encoding of information on the card. There were two encodings, for text and binary data. A card had 80 columns by 12 rows. Recall that the 7090/7094 had a 36-bit word. So for binary data, each row could fit two such words, in columns 1-36 and 37-72. IIRC all the values in 1-36 came before all the ones in 37-72. Columns 73-80 were unused in this mode, and were typically punched with a sequence number so that you could sort the deck after spilling it on the floor.
For text, each column held one character. The rows were labelled, from top to bottom: +, -, and then 0-9.
Riddle: How did they bury Thomas J. Watson? Answer: Nine edge in, face down. (This is how you describe how to orient a deck of cards when placing it in the card reader.)
So. The space character was represented by a column with no punches. A column with a single punch represented, no surprise, +, -, or a digit 0-9. Two-punch columns represented letters of the alphabet, but it couldn't be any two punches; it would be a digit 1-9 along with +, -, or 0. That's just enough to represent the 27 letters of the alphabet:
ABCDEFGHIJKLMNOPQR/STUVWXYZ
Yes, that's right, the 19th letter of the alphabet is slash, in between R and S.
So, that's it, except that you could also combine +, -, or 0 with one of the combinations 7-3, 7-4, 8-3 or 8-4 to generate twelve more punctuation characters, but I don't think anyone memorized those.
By convention, columns 73-80 were reserved for sequence numbers for text cards, too, so a line of text had 72 useful characters.
It's really scary that I can't remember what I did yesterday but I can remember the punch card codes from 65 years ago.