It’s probably easiest to understand with some pictures, I only have correctly working Omnipod (Dash) pods, so I don’t have a failed example, but I think this might be sufficient. Firstly the top, basically a duplicate of the posts above:
that’s a bit out-of-focus because I couldn’t persuade my camera to focus on the top of the top, rather it is focused on the writing underneath. Also I had dremel’ed if off to produce the following photos, firstly the top flipped, so you can see what the yellow dot is:
Kinda mysterious, but I hope clearly fixed in place; the picture is with the top rotated in X, so top-to-bottom (the yellow dot was at the top in the first picture, now it is at the bottom, but the same place left-right). The mystery is explained by the picture of the internals, which has the same orientation as the first shot:
The yellow dot is connected to those two weird pokey things inbetween and below the two nylon cogs. They are springs which make, I believe, electrical contact. The dot itself is, I believe, a clicker; like those annoying things we all had in the '70s (1970s, not 1870s, please, bear with me) that we used to annoy people by clicking inappropriately. This, however, is in a Dash pod.
The really important thing is the PINK (my favorite colour) thing immediately below the clicker contacts. This is connected to the catheter, I think that is clear (the white dust is the result of using a Dremel cutoff tool to melt the top off). The theory is that the PINK thing should only be in that place if the catheter has been inserted.
What happens if the needle does not retract? That is a damned good question; the needle is the wire loop connected to the white nylon to the left of the pink thing. The white nylon bit is connected to the complex gear to the immediate left of itself.
Inadvisable poking with a letter opener (I wear glasses, so the bits of plastic that flew off didn’t injure me) produced the following picture:
What I did there was to break the brassish lever arm off the nylon attachment then push the nylon back to the pink bit. This re-inserted the needle, into the canula (catheter, whatever):
(Ha, I’ve worked out how to use my camera again, along with working out what the damned thing in my skin is called!) Here is the result when I pull the nylon bit back to the original position, retracting the needle:
My conclusion is that there is absolutely no way to tell from external examination whether or not the needle has retracted, which is obviously a serious problem for people looking after those unable to communicate exactly.