When the un-insulated parts of the coil make contact with the paper clips, current flows through
the coil, making it into an electromagnet. Since magnets attract, the coil attempts to align
itself with the ceramic magnet. However, when the coil turns to face the magnet, contact is broken
(because the insulation on one tail is now preventing current flow). Inertia causes the coil to
continue around. When the coil makes are nearly complete spin, contact is re-established and the
process repeats.
Technically (if you look up references on more complex motors), this motor is a single-pole pulse
motor. More complex motors are created by using more than one coil and more complex set of brushes
(the things that connect the coils to the current) so that no matter where the coil is in the
spin pattern, at least one coil is always energized and trying to turn the coil assembly to
align with the next magnet. This motor is, I believe, the simplest motor design that retains the
basic concept of more complex motors.
Reference: http://fly.hiwaay.net/~palmer/motor.html