The heat pump takes the heat (energy) from the ambient air (air that surrounds us) and transfers that heat into the water.
Ambient air is drawn into the heat pump by a fan over a cold element. The heat then transfers to the refrigerant gas. With the help of a compressor, the gas heat is transferred through heating pads that surround the tank. Another way of explaining the heat pump principle is by considering the reverse cycle of a refrigeration plant. In a fridge the heat is withdrawn from the food compartment and transferred into the air.  That is why the food in the fridge gets cold.  Now, using the reveres principle, heat is withdrawn from the atmosphere and pumped into the hot water cylinder.