The center axle is a bearing removed from the read/write arm of an old hard drive. The motor and battery are from a small $20 RC helicopter, the belt is just a small rubber band, and the body is built out of PVC. When the yo-yo is dropped the spinning causes the spring to bend outward and make contact with another piece of metal which closes the circuit and powers the motor. The result is a yo-yo that sleeps for as long as the battery lasts.
Here is a video of the yo-yo in action http://www.youtube.com/watch?v=1_2cGBFV2OM