As I understood it you have an initial address when you create a wallet for example on a Litecoin core node.

All addresses you create after this initial address are deterministic depending on their position. It's like you add just a number to the first address. But they are all unique otherwise sb. would see these addresses belong to one wallet.

And because they are unique your daemon has to watch or compare incoming transactions with every address you created to monitor payments. I might be wrong, but otherwise how does it work?