Uneducated owners/handlers also correct the dog too late in the dog's behaviour. They try to correct once the dog is at the end of it's lead choking itself, pulling away from the handler. This is a waste of time and is cruel to the dog. You must correct before the lead gets tight and allow it to release.
There are two ideas behind the effectiveness of a correction chain.
1. The sound of the metal links pulling across each other near the dogs ear is annoying to dogs. I guess similar to the annoying sound of nails on a blackboard.
2. When the chain tightens for that half a second on the dogs neck, it presses on the carotid arteries (blood path to the brain) along the neck, cutting of circulation to the brain for half a second. This is not harmful to the dog, it just triggers a response in the body of the dog that it doesn't like, therefore it becomes a punishment.
If used with positive reinforcement, it can be a powerful training tool to have.
Think about it this way. You see all those people with their dogs on flat collars, saying how cruel it is to use a correction chain on a dog. I say this to you. What is more pleasant to a dog (or a human)? Having something tighten around it's neck for half a second, or having someone yank/jerk it sideways or backwards by the neck on a flat collar. This can cause major neck/spinal injuries, similar to whiplash. Now you tell me, what's more cruel??