Electromagnetic pulses (EMPs) are generated through high-energy gamma rays, which can knock electrons out of their orbits in low atomic number elements like oxygen and nitrogen. This phenomenon was first observed during the initial H-bomb explosion, which caused power outages in Hawaiian towns hundreds of miles away. The released electrons interact with the Earth's magnetic field, inducing a current that creates a magnetic field capable of damaging electrical systems, including appliances and vehicles. Constructing an EMP would require a significant production of high-energy gamma rays, although specific construction methods are not detailed in the discussion. The conversation also briefly mentions the financial success of the individuals associated with the topic.