Ripple is primarily a trust-based system.  cvTokens require strictly less trust than Ripple.

cvTokens are created by one or more backers depositing BTC into a virtual escrow which operates algorithmically (no trusted parties).  The escrow is aware of the rough market valuation for a cvToken by means of a distributed auction (which is not intended to serve as a primary exchange, those will be developed elsewhere if the cvToken is marketed successfully).  It uses this information to enforce rules for issuance and cash-outs of tokens.

A cashed-out token receives its market value in BTC rather than a straight proportion of overall collateral.  If the token's market value exceeds its straight proportion, the backer must make up the difference, or control over their collateral will be re-assigned to a more effectively collateralised backer and that backer must cash out the token.  If a cash-out fails by being passed through the entire chain of backers, the cvToken collapses into BTC and a straight proportion of the collateral is returned to all cvToken holders.

Anyone may become a backer of an existing cvToken by adding BTC at the same proportion or better as the existing collateralisation--if they wish to add collateral at less than the current proportion but still at a better than 1:1 proportion to the cvToken market value (i.e. if BTC have appreciated) they must do so in proportional cooperation with existing backers via a bidding system.  Via this same bidding system an existing backer may collateralise above-market-value bids on the auction into increased issuance without the bidder needing to become a backer at all, with the existing backer taking full responsibility.

Between these mechanisms cvToken supply is able to expand and contract with demand so that it maintains a consistent valuation.  The expectation is that a cvToken will first be created, then an initial market base of vendors be convinced to accept it in payment (perhaps the same who created the cvToken) and then once consumers are confident in the stability of the system, adoption will increase and third party speculators will have an incentive to increase the token's backing in proportion to market demand for the cvToken.  Most users will not use the underlying framework--they will simply purchase cvTokens at exchanges and use them in commerce.  Specialists will compete to optimise the underlying collateralisation.

At a technical level, the virtual escrow can be implemented (inefficiently) within the existing blockchain using scripted transactions.  The load on the blockchain can be reduced by introduction of custom transaction types for cvToken escrow management.  The auction can be almost entirely off-chain but can also benefit from the creation of custom transaction types.  cvTokens themselves can be implemented as coloured bitcoins to maintain compatibility with that spec, or in several other ways.