The pipe is wrapped in water-permeable fabric, and the pipe is covered with several layers of gravel. Gravity causes the water to flow downhill, and since water follows the least path of resistance, it naturally will flow through the stones into the hollow pipe where the water can flow freely on a downward slope towards the street and away from saturating underneath your foundation.
The basic principle of a French drain is to provide a path for water to flow away from your foundation instead of building up and flooding the soil, causing erosion, soil consolidation, and eventual settlement issues.
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