Geothermal Systems: How do they work?

The other day I received the following e-mail requesting information about geothermal systems and the amount of groundwater they use each day.
“Anecdotally, I understand that geothermal systems extract thousands of gallons of water each and every day. Perhaps 20,000 to 40,000 gallons - solely for the purpose of extracting heat from the water. I'm not sure where the water goes after that: into a septic system? Into an injection well? If so, how deep? And if this much water is being extracted, circulated through household heating systems, and then forced back into the ground, how is the groundwater being affected?”

I was baffled as I thought most, if not all, geothermal systems used a closed loop system thereby not using great amounts of water. However, I have very limited knowledge of this topic and thought maybe some of you could provide more insight and potential answers to these questions.

Anyone?