I can respond with a 'what I think I know.' Seems only reasonable to me...but that doesn't mean it's right. In which case, someone else can correct it.
Yes, it's the 1/8" plastic spacer. Not of course the spacer itself, but what that spacer is sitting between..and that is the poles of the magnet. So, it's the collapse of the field by virtue of the pole passing the exciter/sparky coil.
The CDI does indeed have an ignition 'map' in it that retards the timing about the time the KIPS should kick in. So, timing is determined by the CDI, but the basis of that determination is the passage of the pole.
....he said hopefully.........
;)