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The Beak
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In all birds, the short nerve endings in their beaks contain enough iron to pick up magnetic resonance. This discovery initially led scientists to believe that birds use their beaks to navigate the magnetic field. However, while the iron is capable of picking up changes in magnetic field orientation and intensity, there is no method for differentiating north from south. Also, recent experiments have shown that a bird can be "blinded" from this sense by severing these nerves and still navigate.
The Eye
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Current research shows that there is a magnetic receptor in bird's eyes that can pick up visual information about the Earth's magnetic field. The same experiments as the one mentioned in Section 1 showed that birds with eyes disabled could not navigate at all, showing that the beak's role is secondary or supplementary to a magnetic receptor in the eye. Interestingly, the right eye seems to be more important than the left eye.
Cryptochromes
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Scientists currently theorize that a bird's eye contains proteins called "cryptochromes" that emit free radicals when hit with light. These free radicals are influenced by the magnetic field, and that influence is detected by a region of the bird's brain. There's no way to tell what this "looks" like to a bird, but some propose that the magnetic sense acts as a second layer on top of visual information, causing the magnetic field to look something like shading.
Navigation
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However magnetoreception works, it is considered to be a crucial part of a bird's ability to navigate as it flies. Migratory birds often fly too far from the ground to guide themselves by landmarks and in inclement weather that renders vision impossible. Given that some birds, such as the arctic tern, migrate up to 40,000 miles in a year, the evolution and development of this magnetic sense is crucial to the survival of the species.
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How Does the Earth's Magnetic Field Affect Birds?
Birds are one of the few types of animals that can actually sense the Earth's magnetic field. While the exact mechanics of this sense are being actively worked out in scientific research, scientists generally accept that birds use their sense of the magnetic field to migrate. For a bird that migrates great distances, this sense, called magnetoreception, allows it to stay on course even in difficult weather when visibility is low.