If no Mechanical Power is being recieved, the Pulley will dispense any rope inside of it slowly downwards until it hits an obstacle or is depleted of rope. However, if Mechanical Power is being recieved, the Pulley will start retracting this rope until it is all back inside of it.
An Anchor can be placed beneath a Pulley to attach to the Rope (if there is any). Platforms and Iron Walls can also be further attached to an Anchor to create large, moving platforms. Certain blocks placed on these Iron Walls and Platforms will stay connected, these include: Minecart rails and Redstone dust.
The Pulley also works as a method of upward item transportation, in that moving platforms will also move dropped items vertically with them.
When supplied with a Redstone signal, the Pulley will stop the platform from moving completely, leaving it where it is.
A Well Bucket can also be placed underneath a Pulley like an Anchor to move Water vertically, however the Well Bucket will not attach to Platforms or Iron Walls like the Anchor.