Just to simplify it the ADF works on a directional reciecver, loop and sence aerials, all be it they are digital these days. Not as good as the the old manual analogue ones, picked up the radio stations better. If you bank the acft you bank the aerial therefore create the error.
Dan Winterlands analogy, despite upsetting the wife explains it great.
In practise in cloud in turbulence, icing at night, who cares, even with a bit of map shift the FMS is just s good.