Skiplagged uses a special formula to find hidden city flights. A hidden city flight is one where the layover destination of a series of flights is your actual intended destination.
How it works: Let's say you're flying from Memphis to New York. A flight from Memphis to Toronto is cheaper than a flight from Memphis to New York (even though it's farther away), so you can buy a flight from Memphis to Toronto that has a layover in New York. When you get to New York, you can just leave the airport. The "hidden city" is New York in this case. It works when your flight itinerary has a layover in the city you're actually trying to fly to.
Skiplagged uses a flight-finding formula that considers hidden city flights in addition to regular flights. Skyscanner, Kayak, Expedia, and Google Flights don't. If you go to an airline's website, there is no way to search for hidden city flights. Why would an airline tell you there's a cheaper flight with a layover in your target destination? Skiplagged considers hidden cities, then tells you which airlines and routes you should actually book. If you say you're trying to fly to New York, it will automatically consider flights to all cities that have a layover at a New York airport.
What to do: Skiplagged has pretty good directions. Basically, after finding the best option(s) for you, Skiplagged will recommend what to look for on whichever airline's website your hidden city flight is on. If Skiplagged finds you the above example, a flight from Memphis to Toronto with a layover in New York, it will tell you to search Delta's website for flights from Memphis to Toronto instead of flights from Memphis to New York. This way, Delta will sell you a ticket to Toronto- at Toronto price- instead of a ticket to New York.
Logic and ethics: This is totally fair and legal. From the airline's point of view, you simply didn't show up for your second flight, meaning they can give the seat to someone on standby. You might actually make someone's day if you 'miss' your flight, and they get your seat. Intuition says that the farther you fly, the more expensive the flight should be. Flying north to Toronto should cost more than flying north to New York, but the two cities have different demands, making New York more expensive.