The co-axial light transmits light from the side onto a half way mirror. The mirror reflects the light onto the target. Specular reflected light is allowed to pass back up to the camera whereas as diffuse reflected light from the target is rejected. This in turn causes a contrast at the edge points of a target. In addition, the further the light is from the target the greater the rejection of diffused light becomes, creating greater image contrast and definition.
A few examples of application of co-axial lights: