Composting toilets isolate and contain toilet wastes and allow time for a natural process to occur that will degrade the materials to usable compost.
They work with a slow, low temperature composting that uses air and natural organisms to convert the materials in the toilet deposits into stable, fresh smelling and safe material.
The important feature of composting toilets is that they use a range of air loving microorganisms to recycle the toilet deposits back to nutrients that can be used to improve soils.
This contrast with chemical toilets that use biocides to kill all microorganisms, good and bad and also contrast with water based systems such as septic tanks and sewage systems which use water for transport, but then can only use micro-organisms that live in water and these are predominantly smelly and do not produce an easily usable end product.