In a normal tunnel setup, one tunnels at the IP layer, and dumps all IP packets into the tunnel. At the far end of the tunnel, packets are sent onwards based on the far end's routing table. Things like DNS "just work" because everything happens at a layer below TCP and UDP. In this system, he's making it work for each non-tcp using layer 4 protocol separately, leading to weirdness like rewriting /etc/hosts.
For tcp, he's nating all traffic locally to a local server, which then multiplexes all incoming traffic into the ssh connection. The remote side then unmultiplexes the data. I don't fully understand how this avoids tcp over tcp. Maybe I'm dumb. [edit: yeah, I'm dumb. the tcp connection is terminated at the local server, the contents are pumped over the ssh connection, and the remote side opens a new tcp connection]
I wrote this mostly because I read the readme and went "but how does it work?".