How a card reader works internally and how is it created(the lab process)?

The technology for card readers and writers basically still works the same as cassette tapes. The iron-heavy stripe is magnetized by a writing head, and the stripe is read by sliding over a sensitive metal head that picks up the tiny differences in magnetic charge.

Back in the bad old days, it was a layer of tape exactly the same as was used in cassette tapes. I remember cards where the strip came off, looking exactly like a cassette's tape.

Newer cards have a stripe of iron-heavy material embedded in them as the plastic cards are created, but it is still a magnetic stripe. While I don't know the exact lab process, I imagine it is effectively the same thing, running a line of iron-heavy material over a part of the card as it is put together in layers.