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Magnetotatic Bacteria
Magnetotactic bacteria is a class of bacteria known to use magnetic fields for orientation. These bacteria demonstrate a behavioral phenomenon known as magnetotaxis which is how the bacterium orients itself and migrates in the direction along the Earth's magnetic field lines. The bacteria contain magnetosomes, which are nanometer-sized particles of magnetite or iron sulfide enclosed within the bacterial cells. The magnetosomes are surrounded by a membrane composed of phospholipids and fatty acids and contain at least 20 different proteins. Magnetosomes form in chains where the magnetic moments of each magnetosome align in parallel, causing each bacterium cell to act as a magnetic dipole, giving the bacteria their permanent-magnet characteristics.

Cryptochromes
For animals the mechanism for magnetoreception is unknown, but there exist two main hypotheses to explain the phenomenon. According to one model, magnetoreception is possible via the radical pair mechanism. The radical-pair mechanism is well-established in spin chemistry,  and was speculated to apply to magnetoreception in 1978 by Schulten et al.. In 2000, cryptochrome was proposed as the "magnetic molecule", so to speak, that could harbor magnetically sensitive radical-pairs. Cryptochrome, a flavoprotein found in the eyes of European robins and other animal species, is the only protein known to form photoinduced radical-pairs in animals. The function of cryptochrome is diverse across species, however, the photoinduction of radical-pairs occurs by exposure to blue light, which excites an electron in a chromophore. The Earth's magnetic field is only 0.5 gauss and so it is difficult to conceive of a mechanism, other than phase shift, by which such a field could lead to any chemical changes other than those affecting the weak magnetic fields between radical pairs. Cryptochromes are therefore thought to be essential for the light-dependent ability of the fruit fly Drosophila melanogaster to sense magnetic fields.

Magnetite
The second proposed model for magnetoreception relies on Fe3O4, also referred to as iron (II, III) oxide or magnetite, a natural oxide with strong magnetism. Iron (II, III) oxide remains permanently magnetized when its length is larger than 50 nm and becomes magnetized when exposed to a magnetic field if its length is less than 50 nm. In both of these situations the Earth's magnetic field leads to a transducible signal via a physical effect on this magnetically sensitive oxide.

Ampullae of Lorenzini
Another less general type of magnetic sensing mechanism in animals that has been described is electromagnetic induction used by sharks, stingrays and chimaeras (cartilaginous fish). These species possess a unique electroreceptive organ known as ampullae of Lorenzini which can detect a slight variation in electric potential. These organs are made up of mucus-filled canals that connect from the skin's pores to small sacs within the animal's flesh that are also filled with mucus. The ampullae of Lorenzini are capable of detecting DC currents and have been proposed to be used in the sensing of the weak electric fields of prey and predators. These organs could also possibly sense magnetic fields, by means of Faraday's law: as a conductor moves through a magnetic field an electric potential is generated. In this case the conductor is the animal moving through a magnetic field, and the potential induced depends on the time varying rate of flux through the conductor according to $$V_{ind}=-\frac{d\phi}{dt}$$. These organs detect very small fluctuations in the potential difference between the pore and the base of the electroreceptor sack. An increase in potential results in a decrease in the rate of nerve activity, and a decrease in potential results in an increase in the rate of nerve activity. This is analogous to the behavior of a current carrying conductor; with a fixed channel resistance, an increase in potential would decrease the amount of current detected, and vice versa. These receptors are located along the mouth and nose of sharks and stingrays. Although debated, it has been proposed that in terrestrial animals the semicircular canals of the inner ear could host a magnetosensitive system based on electromagnetic induction.