It has a resistor mounted in the fan. At full speed it is a direct connection to the battery. At speeds 1 and 2 it runs through the resistor. Resistor is a length of wire wound round a white ceramic block (take off black plastic rain cover from scuttle and you will see it on the heater fan). The wire corrodes and breaks giving an open circuit. If you are lucky/careful you can find the broken ends and solder it back together, otherwise its a new resistor. I think they are over £20 from VW.
If the wire looks OK, I think there is also a thermal fuse on there. Its possible this could have blown, but in 99% of cases the resistance wire has corroded.
