When a bar magnet is broken in the center of its length, two complete bar magnets with magnetic poles on each end of each piece will result. If the magnet is just cracked but not broken completely in two, a north and south pole will form at each edge of the crack. The magnetic field exits the North Pole and reenters at the South Pole. The magnetic field spreads out when it encounters the small air gap created by the crack because the air cannot support as much magnetic field per unit volume as the magnet can. When the field spreads out, it appears to leak out of the material and, thus is called a flux leakage field.
If iron particles are sprinkled on a cracked magnet, the particles will be attracted to and cluster not only at the poles at the ends of the magnet, but also at the poles at the edges of the crack. This cluster of particles is much easier to see than the actual crack and this is the basis for magnetic particle inspection.