At the diagram above shows, there are two mirrors in the 'eye piece' of a camera lucida: a
normal one and a half-silvered (one-way or semi-transparent) one. The object is reflected from
first mirror onto the half-silvered one. Your eye sees this reflection and simultaneously looks
through this mirror to see the paper too, so it appears that object if on the paper. (See this
photo for what you'll see if you were working on a black sheet of paper.)
Reference: David Hockney's Theory About the Old Masters Using a Camera Lucida
In his book Secret Knowledge the artist David Hockney set out his controversial thesis that
various Old Masters used a camera lucida and other optical devices. According to Hockney
this can be seen in the shift in style of portraiture in the fifteenth century.
