The ultimate cause of magnetism is electrons. When electrons are in a magnetic field the forces they experience cause them to move in tiny circles. The circling electrons create their own magnetic fields that give rise to diamagnetism. Electrons are tiny magnets themselves, with north and south poles. In most atoms these magnets are paired so their fields cancel. But, if there are an odd number of electrons, the unpaired electron produces a paramagnet. Oxygen, for example, is paramagnetic.

In ferromagnets the unpaired electrons in large groups of atoms interact with each other so that they point in the same direction. This group is called a domain. When a ferromagnet is put in a magnetic field the domains can line up with their poles facing the same direction, making the material a magnet. In most materials when the magnetic field is removed the domains revert to their former random directions and the material is no longer a magnet. For certain alloys, however, the domains remain aligned, resulting in a permanent magnet.