The scheme is said to work by essentially supplying different information about the route that will be taken. When hailing a ride, a passenger will be shown a route which is longer than the one shown to the driver, and two different prices will be separately calculated for the two routes. Since the one shown to the passenger is longer, the fare goes up as well, but the driver only gets paid for the actual route, while Uber pockets the change.
According to the lawsuit, the scheme was implemented in September, after Uber switched to an "upfront" pricing scheme, which calculates fare price depending on both distance and time estimates. The suit alleges that Uber's algorithms intentionally showed a less efficient route to passengers, while drivers got the best possible one instead. It also claims this was a "well-planned scheme to deceive drivers and users," rather than a software bug.
source: Ars Technica