Quote from ETH wiki:
In general, a proof of stake algorithm looks as follows. The blockchain keeps track of a set of validators, and anyone who holds the blockchain's base cryptocurrency (in Ethereum's case, ether) can become a validator by sending a special type of transaction that locks up their ether into a deposit. The process of creating and agreeing to new blocks is then done through a consensus algorithm that all current validators can participate in.

You can read the full article here: https://github.com/ethereum/wiki/wiki/Proof-of-Stake-FAQ