The underlying mechanisms governing the behaviour of displacement piles in sand are not well understood, leading to unreliability in design methods. A series of plane-strain calibration chamber tests has been conducted in order to quantify the penetration mechanism around the pile tip, and the response of the interface layer adjacent to the shaft during further penetration. A series of eight tests is reported, examining the influence of soil type, initial state, pile breadth and the use of a driving shoe. A novel image-based deformation measurement technique has been used to observe the displacement and strain paths, which are found to be relatively independent of soil type. The measured strain paths are similar to predictions made by the strain path method, and contrast sharply with assumptions implicit in cavity expansion solutions. An interface zone adjacent to the pile shaft comprising fine broken soil particles was observed to contract while shearing along the pile-soil interface. This mechanism offers an explanation for the degradation of shaft friction at a given soil horizon with increased pile penetration ('friction fatigue'), and a subsequent recovery of capacity over time ('set-up').