I bought one of these, but installed it differently than instructed. The setup works by attaching a pump to the water heater outlet, and at the sink farthest from the water heater you attach a special regulating valve between the hot and cold supply lines, creating a bypass and circulating loop. The valve allows water to flow between the hot and cold connections, the pump pushes the hot water along the supply line up to the sink with the regulating valve, the standing cold water in the hot water line flows into the cold line and returns to the water heater. Once the hot water reaches the valve, a thermostat inside it closes, preventing hot water from continuing to flow back down the cold water supply line to the water heater.
As you can probably surmise, the system is not without a bit of a fault by design. In order to "rotate" a decent amount of hot water up to the most distant point of use (all the other sinks, tubs, etc in between will have the hot water nearby as the system does its job), there has to be decent flow. This valve has a thermostat as I mentioned earlier. If you turn on the water at the spigot and await the hot water, you know it will slowly begin to warm before it reaches the highest temperature, since the column of hot water arriving must heat all the plumbing it is traveling through. The control valve/regulator must allow a certain amount of water to flow back down the cold water line in order to bring heat through the entire hot line. As the water begins to warm, some of this begins traveling back down the cold line before the thermostat closes. This leave some "warm" water in the cold line that some people might object to. It's not "hot", but it is noticeably warm for an instant when you open the cold side of the faucet. Also, once the hot line has been "primed" with hot water and the thermostat closes, the flow is stopped, leaving the pipes to cool off. Of course, the thermostat opens a bit, allows the water to move slowly, but, again, you end up with lukewarm water in the hot line and tepid water in the cold.
It's recommended that the hot line be insulated to make the most of the system. I went a step further and installed a return line from the most distant point of use, all the way back to the water heater, and installed the valve nearest the water heater in a simple flow-through fashion. This works best, but I had access in my basement in order to run the additional line. All pipes, hot, return and cold, are insulated. In my case, the thermostatic valve is not necessary anymore, but the valve also contains a check valve that prevents reversed flow of cold water into the return when hot water is in use.
It's a simple system, really, but explaining it is, well, difficult.
The pump also has a timer used to turn the circulation on and off based on the most likely times you'd be wanting hot water readily available during the day and night. In the middle of the night, for example, there would be no need for instant hot water when people are asleep. Shutting the circulator off saves some energy from heat lost by hot water standing in long runs of pipe.
