As of right now, they are essentially a different form-factor of the RFID-enabled KTTW cards. In the future, there is technology built into the bands (active RFID) that may allow some enhanced experience (the common example of this would be performers being able to pick your name out of "thin air" and potentially enhanced attractions). The bands in general are not directly tied to ticket purchase, but function like existing KTTW cards when tickets are purchased as part of a package (and, along the same lines, you should theoretically be able to add existing and 3rd party tickets to them, just like the KTTW cards.)
You can customize them in advance, selecting colors and imprinted names (on the inside). If you do not customize in advance, you'll receive the plain gray ones either shipped to you or when you check in. Right now, only certain resorts during certain testing windows are receiving the bands.
The RFID system as a whole comprises several different subsystems, in which the RFID cards and MagicBands are the access key for the guest. One of the major subsystems is the FP+ system, which is currently undergoing concurrent testing with the MagicBands at limited resorts during specific windows. Details of the FP+ system (known, unknown, rumored, speculated, and deduced) are available in a few different threads, which tend to get heated so I won't go into them here

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