That circuit is an RF-oscillator/ transmitter. What the text implies but doesn't say is that you need a working AM-radio and a station to listen to too.
When two transmitters are real close in frequency you can hear the difference as a tone in the speaker.
Now, ferrite as is used in one of the frequency-determining components in this transmitter, has a magnetic permeability μ that is obviously a major inductance determining factor. The thing with ferrite is that μ is not constant, but goes down with increased magenetic fields.
Thus when the ferrite rod is aligned with earths magnetic field the inductance is lowered and the frequency gets higher, altering the interference tone in the radio.
Have a look
here if you'd like to learn more about electromagnetism.