This is where the development process happens. The following explanation describing colour pictures is a little complicated, but the diagram may help in understanding the process, though it took me a while to figure it out. I got the bulk of this explanation from Land's Polaroid by Peter C. Wensberg, page 217:

• Three primary colors form an image in color photography: blue, green, and red; their complementary colors are yellow, magenta, and cyan. Successive layers of emulsion were coated on a negative base, three of which are silver halide emulsions; one sensitive to blue light, one sensitive to green, one sensitive to red.
• Beneath each of the emulsion layers was a layer of dye-developing molecules in the complementary colors.
• When blue light struck the negative, it exposed the blue-sensitive emulsion layer that blocked the dye-developers immediately below it, in this case yellow, from transfering color to the positive sheet.
• The magenta and cyan dye-developers, however, were free to pass through to the receiving sheet, where they were mixed to form a blue image.
• When green light reached the green-sensitive layer, the magenta dye-developers beneath it were blocked, but the cyan and yellow dye-developers were allowed to move to the positive, where they formed green.
• In the same way, red light blocked the cyan dye, but allowed magenta and yellow to combine on the receiving sheet to form red.

Black and white film works differently. Here's an explanation I found in a book on Polaroid black and white films:

• As the reagent is spread by the rollers, several processing reactions begin concurrently.
• The negative develops with extreme rapidity.
• At the same time, a portion of the unexposed silver halide grains carrying the latent positive image is solubilized, that is, converted to a soluble silver complex.
• In the print films, the solubilized silver complex (and the latent positive image it carries) is transferred by diffusion out of the negative emulsion, across the thin layer of reagent, to a paper or plastic sheet.
• This sheet, called a positive image receiving sheet, contains special chemical nuclei which catalyze the precipitation of the solubilized silver complex to a visible metallic silver image.
• The very fine silver particles form a microscopically thin image layer which has excellent covering power. As a result, the system uses silver with great efficiency.
• The material within which the metallic silver is deposited may vary in composition from one film type to another.
• The surface of the print film negative is designed to retain most of the viscous processing reagent after the film unit is peeled apart; the surface of the print is designed so it will not bond with the reagent.

Simple, right? No wonder Edwin Land is recognized as a genious.