Henna has Lawsone, a tannin dye molecule, in its leaves. You can't see it because it is masked by the chlorophyll. When you pulverize the leaves and mix them with a slightly acidic liquid such as lemon juice, the dye molecule becomes available as the cell walls' cellulose dissolves. The dye molecule can then migrate out of the paste, breach cuticle cell walls in the hair shaft, and bind with the keratin.
If the idea of Lawsone "migrating" from henna paste into keratin seems confusing, compare it to this: if you put a wet teabag on a white table cloth, the tannin in the tea "migrates" from the teabag into the cloth fibers, binds with those fibers, and leaves a stain. And, the longer you leave the teabag there, the darker the stain.
Body art quality henna has higher dye content than hair quality henna, so more Lawsone is available to saturate the cuticle.
To release Lawsone efficiently, while preserving the hydrogen atoms necessary to bind the molecule to the keratin, mix henna powder with an acidic liquid, and leave it at room temperature overnight.
Click on the images below for bigger pictures and more information on how to dye your gray hair with henna, indigo, and other plant dyes: