A Bitcoin ATM is a kiosk that lets users buy the cryptocurrency, similarly to the way that ATMs (automated teller machines) provide financial services related to traditional fiat currencies. Some machines also enable transactions with other cryptocurrencies, such as Litecoin, and some allow users to sell as well as buy.
Bitcoin ATMs look a lot like conventional banking machines but they operate differently. For example, they do not dispense currency but enable the transfer of funds to or from a Bitcoin address. Bitcoin ATMs also vary but here's a quick and general explanation. After the machine connects the user to an exchange, they select the type of transaction they want to make, which is typically "Buy Bitcoins." Verification usually consists of a code sent to the user's mobile, after which they supply the Bitcoin address where the funds are to be sent. The user then puts cash into the machine. Once the transaction has been confirmed, the currency is delivered to the address the user supplied.
Although people can conduct Bitcoin transactions online, the ATMs make it simple for people without much technological knowledge to purchase and transfer cryptocurrency. Completed Bitcoin transactions are irreversible and that has made the cryptocurrency -- and Bitcoin ATMs in particular -- popular with scammers.
Unfortunately, people without much tech savvy are also the most likely victims of scams. Measures suggested to prevent the use of Bitcoin ATMs for scamming include posting prominent messages about the dangers on or around the ATMs and requiring a waiting period for large transfers, especially for first-time users.
Watch a demonstration of using a Bitcoin ATM: