This article is from the Radio Control (R/C) Flying FAQ, by Shamim Mohamed email@example.com with numerous contributions by others.
The gyro is positioned so that it senses yaw. It then feeds small inputs
to the tail rotor servo to counter the yaw that it detects. This keeps the
helicopter from yawing to the left and right when you don't want it to.
Left-right movement of the left stick also supplies input to the tail rotor
servo; so you and the gyro are both giving control inputs to the tail. A
gyro is a MUST. It's probably not an exaggeration to say that gyro-based
stabilization of the tail rotor made R/C heli flying feasible. It is
possible to fly an R/C heli without a gyro, and it's also possible to
juggle seven balls. It's just darn hard! Furthermore, it's definitely not
something you want to try tackling when you're just getting started.
Without a gyro, the heli can begin to whip around wildly as soon as the
skids leave the ground. The heli will do a 180-degree turn and you're
looking at an angry helicopter coming right at you before you know what
happened. Definitely not something for a beginner to tackle.