How does Wastegate work?

A Wastegate is simply a turbine bypass valve. It works by diverting some portion of the exhaust gas around, instead of through, the turbine. This limits the amount of power that the turbine can deliver to the compressor, thereby limiting the turbo speed and boost level that the compressor provides.

The Wastegate valve can be “internal” or “external”. For internal Wastegates, the valve itself is integrated into the turbine housing and is opened by a turbo-mounted boost-referenced actuator.
An external Wastegate is a self-contained valve and actuator unit that is completely separate from the turbocharger.
In either case, the actuator is calibrated (or set electronically with an electronic boost controller) by internal spring pressure to begin opening the Wastegate valve at a predetermined boost level.
When this boost level is reached, the valve will open and begin to bypass exhaust gas, preventing boost from increasing.