A specific measurement model based on quantum nondemolition monitoring of oscillator quanta is used to illustrate the essential elements of the quantum theory of measurement, viz., state reduction and existence of a ‘‘pointer basis,’’ recently discussed by Zurek. The form of the interaction between the meter and its environment determines the system observable recorded by the meter. In our model this quantity is the square of the oscillator’s quanta. The corresponding pointer basis states are the meter coherent states. The more accurate the measurement the more excited (and classical) these states become. We show explicitly that the state reduction of the system during measurement is due to nonunitary evolution resulting from the meter-environment coupling. A particular realization of the environment as a photoelectron counter is discussed.