to cancel out noises, one channel needs to have the waveform inverted. so, left or right channel would be inverted. This would cancel out everything. so, you have a mic on one side with a dsp that inverts the sound waves and throwing that into one ear. Then the headphones play whatever you want them to. pretty low tech actually

But reality is never that simple - the DSP chip needs to get the delay right (hence the 4 modes I suspect) and not introduce any noise of it's own while still catering for a wide dynamic range. 99% is hard to believe - although one expects the 'tag' to come down a notch some something that is such an old idea?