Can someone explain how closed loop works?

[wayner]

I'm having a new tank built very soon & don't really understand how a closed system works, I know it gets rid of the powerheads in the tank, but where the hell do put the pump (mag7)?, in the tank?, outside the tank, do I get rid of my sump?

Confused, if I can get a good grasp on how it all works,I would think about doing this on the new tank, how many extra holes do I need drilled?, as of now, I was just going with the overflow & hole drilled in the back for the return from the sump?

Anyone?