It is probably a "pitot" tube type of speedometer. There is a small oriface on the leading edge of the lower unit. Water pressure is transmitted thru small tubes to a pressure gauge, which is calibrated in MPH or NMPH. If the tube is obstructed or pinched it will read low.
If you want accurate "thru the water speed", go to a paddle wheel type of transducer. Cleaning the tube and orifice will help give a more accurate reading. But these have been around forever, and were the only "speedometers" on many boats back ihe 40's and 50's. I have not used one since the early 1960's, when paddle wheel transducers became readily available.
If you want more modern technology get a doppler ultrasonic gauge (at a good price: Martron and Brooks and Gatehouse make them in the $800 to $1400 range).
I only use GPS speed. When I was racing sailboats, I used a paddlewheel type which was quite accurate, unless it was fouled by sea grass etc. Then you had to pull it out to clean-leaving a 1 1/2" hole in the bottom of the boat, which you quickly put a dummy plug into, so you could clear the transducer.