It's a bearer asset. A string of characters that the mint agrees to trade for bitcoin. E.g. your cashu wallet asks the mint to make a lighting payment for you, and you give it these cashu tokens to pay for it

So basically you swap lighting for cashu, and vice versa

The token is essentially an IOU with a serial number, signed by the mint

The cool thing of that the mint signs the IOU without seeing the serial number (cool maths going back to 1982), and therefore it's very private. The mint makes the payment, after verifying the signature and checking for double spending with the serial number, but the mint doesn't know who it originally issued that token to

Cashu wallets pay and receive lightning like any lightning wallet, but with this extra bit of privacy. It has other advantages too, I'm working on very high frequency micropayments with Cashu (sending a millisat, hundreds of times every second)

But the obvious risk if that the mint can steal it. So the balance should be kept small.