The South-Pointing Chariot was surely one of the most complex mechanical devices of the Bronze Age (or indeed of any age prior to the Renaissance). For mechanical sophistication and sheer engineering ingenuity, only the Antikythera Mechanism matches it (along with, perhaps, some of Archimedes's more fabulous-sounding devices). The South-Pointing Chariot, however, may predate the Antikythera Mechanism by more than 2,500 years, since the Antikythera mechanism has been dated to approximately 80 BCE, while the Yellow Emperor, if historical, ruled from 2697 to 2597 BCE.
But what exactly was it? It was a mechanical compass, built by the craftsman Fang-Bo for the Yellow Emperor. Some sources say that it was designed by Huang-Di himself; others say that it was designed by Fang-Bo. Does it really matter? It existed; it used differential gears some 4,100 years before they were re-invented in the West by Renaissance clock-makers; it was a machine that had a pointer in the shape of a little wooden man (who was, as befits a pointer, carved so that he appeared to be pointing with one outstretched wooden arm) that pointed due south no matter where you went. And it was also, as one would expect from the name of the contraption, a chariot; a two wheeled vehicle drawn by one or more horses, meant for use in battle, both as an early weapons platform, and, judging from the legend, as a mobile command post.
What legend? Well, you can read about it in more detail in Excalibre's writeup on the Yellow Emperor (hard-linked above), but here's the gist: the Yellow Emperor, at one point in his career, was faced with a most formidable foe , the Hmong culture hero/tribal deity/cthonic demon Chi-You. Chi-You was invincible (or rather, since later events seem to contradict his invincibility, very very hard to beat in battle). He was a giant (some say that he was a minotaur; others say that he had six arms and four eyes and an iron head, making him some sort of alien cyborg type figure); he ate stones, and his teeth were harder than the hardest flints; his strength terrified men and gods alike. And this was no stupid giant, no brainless bruiser--unlike some of his distant and degenerate relatives in the West, who were foolish enough to use clubs and fists against Odysseus, Beowulf, Lancelot, Jack and the rest of their giant-killing, sword-wielding, armor-wearing, quick-thinking ilk. No, this was a giant who knew the importance of being ahead in the perennial arms race between monster and man. In point of fact, Chi-You was the first to forge weapons of bronze; he it was who first showed men how to drench the earth in smoking gore. And he understood strategy; he understood the importance of disorienting and demoralizing one's foe. Thus it was that in the great battle of Zhoulu against the Yellow Emperor of the Han people he deployed (or conjured, or according to at least one source sneezed) a thick, magical fog, to confuse and terrify the Yellow Emperor's forces.
Which is exactly where the South-Pointing Chariot came in handy. We'll never know whether the Yellow Emperor had some sort of flash of prescience when he ordered the construction of the South-Pointing Chariot, or whether he was simply supremely lucky (if so, given that the Yellow Emperor is supposed to have laid the foundations of almost every aspect of Chinese culture, and given that the Chinese do have a healthy tradition of gambling, we might speculate that the Yellow Emperor was perhaps also the first God of Gamblers, anticipating the Chow Yun-Fat character by 4700 years), but at any rate the South-Pointing Chariot enabled the Yellow Emperor's troops to navigate in the fog (or, if you believe the sneeze story, the Chi-You-saliva aerosol) and surprise their enemies (essentially the same tactic that modern day American forces are said to use in urban warfare at night; they go in with night vision goggles, which lets them see where they're going when their enemies cannot).
So, how exactly did the thing work? The principle is quite simple.* Imagine you have two wheels on a common axis. Now make a turn. The wheel on the outside of the curve travels a greater distance than the wheel on the inside of the curve, right? Now extrapolate: imagine that one wheel remains in the same place while the other wheel revolves around it. This indicates what direction (and to what degree) the chariot has turned, in relation to its original heading, correct? So in order to build a chariot that has a pointer that conserves the original heading, no matter how you twist, turn, pull or push your chariot, all you have to do is to find some way of keeping track of the difference between the distance traveled by one wheel in relation to the other wheel, translate that into variation in heading, and then display it on your handy-dandy hand-carved wooden analog output device.**
In any case, the South-Pointing Chariot still remains a source of inspiration for many and is a source of national pride for the Chinese. The task of building a functional south-pointing chariot is still given as a first-year assignment to many engineering students around the world, and several artists have used the concept in their work.
*--Or, of course, you could always just play with those funny iron-attracting stones for a while until you figure out that, suspended in the air or floating on water, the stones always point the same way--but that's another Chinese invention. Note that Dean Kamen of Segway fame has, because of the (in his view) needless complexity of the South-Pointing Chariot, as compared to the magnetic compass, invoked it as an example of what not to do when trying to solve an engineering problem. Why go to the trouble of inventing something so complex, he argues, when you could solve the problem in a much simpler and more reliable way?
**Yep, easy as pie for late Neolithic / early Bronze Age people without precision instruments and only rudimentary hand-manufacturing techniques...