First, background reading:
https://en.wikipedia.org/wiki/6to4
https://en.wikipedia.org/wiki/IPv6_rapid_deployment
The basic idea is you create a SIT tunnel device and assign it an IPv6 /64 composed of two parts:
1. A network prefix between 32 and 56 bits long. This prefix is the same for all machines in the network.
2. A subnet derived from the machine's IPv4 address, minus the netmask.
For example, if your IPv4 addresses are allocated from 192.168.1.0/24 and the machine has 192.168.1.155, then the network prefix should be 56 bits long (64 - (32 - 24)) and the machine's prefix is `xxxx:xxxx:xxxx:xx9B::/64`.
The Linux kernel knows how to wrap the IPv6 with IPv4 so it can route within your local network to any other machine with a similarly configured tunnel device. If you want to send packets to 192.168.1.200 then they get addressed to `xxxx:xxxx:xxxx:xxC8::1` or whatever, they'll transit the IPv4 network like normal, and on arrival the receiving machine's kernel will strip off the IPv4 wrapper and route the IPv6 locally.
How's this useful? Well, if each machine has a /64 prefix then each pod can be allocated an IPv6 within that prefix without coordinating with other machines. Let's say the pod gets `xxxx:xxxx:xxxx:xxC8::aaaa:bbbb:cccc`. Anything with a correctly configured tunnel and that pod IP can route it traffic, no proxy or iptables needed.