Imagine that password hashes are six characters, and `abcdef` is the only pwned password we know about. A smaller version of this tool would reject your password if it hashes to anything that starts with `abc` (such as `abc000`, `abcdee`, `abcdef`, etc). With this toy example, we can see that this is deliberately pessimistic -- it only is a "your password might be pwned" indicator.
It's like throwing out anything in your fridge that is past its expiration date, even if you don't know whether it's actually spoiled.