From 2007.igem.org

We will include the Cre reporter construct on the same plasmid as the T7 RNA Polymerase gene. This plasmid will only exist in the competent cells used for re-transformation of flipped graphs. The construct contains a promoter, two loxP sites with a backwards RFP (used as a spacer) and transcription terminator between them, as well as a Tet resistance gene downstream of the second loxP site. If Cre Recombinase is not present in the cell, then transcription, intialized at the first pLac promoter, is terminated before the Tet resistance gene can be transcribed.

If Cre Recombinase is produced by the retransformed plasmid, then excision of the RFP-Reverse gene and transcription terminator region will occur. This will eliminate termination of transcription upstream of the Tet resistance gene and give the cell resistance to Tetracyline.

The image above shows the excised portion of the Cre reporter in the presence of Cre. This DNA fragment would actually exist as a circular strand of DNA, but would not survive without an origin of replication.