How does an Artifical Horizon work?

I'd never really given much thought to artificial horizon instruments.
I had always assumed it was basically a liquid, and thus maintained
 it's own level when the plane isn't.
But of course, while drinking my coffee as a passenger in a car
 recently, I noticed that when cornering, the centrifugal force works
upon the coffee during a turn, and causes the coffee to flow to one
 side, and thus the liquid doesn't indicate "level" when subject to
 forces during a turn.

This made me wonder just how a plane subject to a great range of
 forces in all directions when banking, turning etc. has an instrument that
 always knows what "level" is.
It seems obvious now I think about it, but I'd never previously given it
any thought at all really.  Obviously it can't be a liquid in the way
I had originally assumed, as it would not remain level during a turn.

Any one care to fill me in on how an Artifical Horizon (or is it called an
Attitude Indicator?) works?

Thanks
Trentus