High-efficiency gas storage water heaters employ the same technology as standard gas storage water heaters: a glass-lined steel tank is heated by a burner located at the bottom of the tank. But a few basic changes make them operate more efficiently.
A standard gas storage water heater is like a water tank sitting atop of a gas fireplace with the chimney running straight up through the middle, exiting at the top. A gas condensing water heater has its "chimney" or flue designed with greater surface area. The heat and combustion gases have much farther to travel before they exit the water tank, so more heat is transferred to the water in the tank.
High efficiency models simply have better insulation, heat traps, and more efficient burners, improvements that have a modest impact on price but increase efficiency by about 7.5%. To increase efficiency further, manufacturers may add a power vent to accelerate the venting of combustion gases. This may increase the installed cost, but savings are also greater.