Millivolt style gas heaters control the flow of gas with the main gas valve, item 3 above.  This valve is powered with a very low voltage supply source, called the pilot generator.  The original name for this device is called a 'thermopile', and  is simply an encased, twisted pair of wires made from dissimilar metals, such as copper and zinc.  When this type of twisted wiring is heated, it generates a small voltage. 

The gas heater uses this voltage to operate 2 separate electro-magnetically operated valves inside of it.  These precision devices are designed to open and allow the flow of gas, with as little as 250 millivolts applied to them, however, the valves are most effective with approximately 450 millivolts of power. 

Most pilot generators will generate as much as .850 volts (850 millivolts), when new.  Over time, this voltage level will deteriorate, and the valve's operation may become erratic, and sometimes just stop working altogether.  At that point, if the voltage output of the pilot generator is less than .250 volts underload from the gas valve, then it's time to replace the generator.

The Pilot Valve
The first valve is called the pilot valve.  When you initially ignite a pilot light flame, you must hold down the rotating valve select switch for a short while to get the pilot to stay lit.  What is happening, is that while you are holding down the red knob, you are bypassing the electrically activated pilot valve, and allowing the thermopile/pilot generator to heat up sufficiently, to generate enough voltage to keep the pilot valve open.  Once this happens, the valve is opened, and then you can release the control knob.

This provides a critical safe operation feature, in that if the pilot light ever goes off, the pilot generator cools off, and subsequently, without enough voltage to keep it open, the pilot valve will turn itself off, preventing flooding of gas in the heater or the room where it is located.

Main Gas Valve
The main gas valve, simply supplies gas to the burner manifold.  Also operated by the pilot generator, the voltage/current flow from the generator goes through a number of devices in a daisy chain fashion.  If any of these devices break the circuit, the main gas valve will shut down, stopping the heater from operating.  These devices almost always incorporate a thermostat, on/off switch, high temperature limit switches located in the water manifolds, pressure switch, and a flame switch which is usually located near the front opening of the burner tray compartment. 

What's a Fireman Switch?
Sometimes, there is also a connection block usually colored red, called the 'fireman' switch connection.  What this is normally used for, is for a connection to a remote thermostat, and to a micro-switch contained inside the pool/spa timer. 

In the latter, let's say that you've got a pool or spa pump set to turn on at 4:00, and turn off at 8:00.  The position of the microswitch on the timer, shuts down the heater operation approximately 15 minutes prior to pump shut down, to give the heater time to cool down with the water continuing to run through it.  On some heaters, without this switch, it is possible to cause problems with the heat exchanger, and/or heater manifolds due to excess heat build up after the pump has shut down.

The millivolt heater is quite an efficient system, and has been proven for many many years, and as such, is still being produced by many manufacturers.

Service Precautions
Never under any circumstances, disassemble a gas valve and attempt to repair it.  These are extremely precision devices, and the slightest error in reassembly, including scratching the milled surfaces or warping the control rods, could result in a disaster that could burn your house down... or worse.  Always replace the gas valve as a complete assembly.