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Whether or not it is a mechanical or electronic meter, the meter is placed along the local water line (the branch off of the main line that carries water to your home, office, store, etc. Water flows through this pipe as you consume it when you turn the taps on and stops when you turn the taps off.
A mechanical water meter has a turbine inside that spins as water flows through. This turbine is calibrated to show the amount of water consumed, similar to a speedometer/odometer on a car that shows speed/mileage as the wheels turn.
An electronic water meter has a sensor instead of a mechanical turbine that records the flow of water.
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