Despite how awesome they are, Faraday bags are actually based on REALLY old tech. Specifically, the Faraday cage, so named after the English scientist Michael Faraday, who invented them in 1836.
Faraday bags are just modern versions of the Faraday cage, so they work exactly the same way.
In short, Devices like smartphones connect to phone networks via wireless signals but also have other wireless connection capabilities as Bluetooth or wireless Wi-Fi networks such as the 802.11b/g/n standard. Even with the standard security features on a smart device, they can still be susceptible to being an attack from an outside source to alter, delete or even add evidence to the phone or another device.
A Faraday bag, much like the Faraday cage, is an enclosed, sealed unit which prevents signals from being sent and received thanks to the material the bag is made from.
If you prefer a more detailed explanation, Linus Tech tips has a good one below: