This article is from the RCA SelectaVision VideoDisc FAQ, by firstname.lastname@example.org (Tom Howe) with numerous contributions by others.
CED stands for Capacitance Electronic Disc, which refers to the method
used to encode the video and audio information on the disc surface.
Capacitance can be defined as the ability of two adjacent conductors to
store electric charge, and in the CED system these adjacent conductors
are the carbon-loaded disc and the thin titanium electrode deposited on
the diamond stylus. The mathematical formula for capacitance contains
several variables, but with the CED system these variables are all nearly
constant except one-- the distance between the electrode and the surface
of the disc immediately under it. Within the grooves on the disc surface
are microscopic peaks and valleys, several times smaller than the
diamond stylus, which rides smoothly on the crests of several adjacent
peaks. But the electrode is much smaller than the stylus, so the
distance between the electrode and disc surface is constantly changing
as peaks and valleys pass underneath. This varying distance produces a
varying capacitance, from which the audio/video signals are eventually
decoded by the player's signal processing circuitry.