It is fed using a fascinating mechanism called "cross-attention" that originated in the NN architecture called Transformer - which was used to achieve state-of-the-art translations. It uses something like associative memory, where a NN inside Stable Diffusion, that generates image (UNet, working in latent space), at almost each step "asks" the whole encoded prompt to provide data at various positions using query vector Q that is matched against key vectors K and value vectors V [0].

How Stable Diffusion works [1] as a whole is not really hard to comprehend at a high level - but you'll need some prereqs - probability theory underlying this is explained in Variational Autoencoders [2], then Diffusion Models [3] sort of made a really cool "deep variational" autoencoder that uses small noise-denoise steps, but largely the same math (variational inference), but they were unwieldy because operated in pixel space, after that Latent Diffusion Models [4] democratized the thing by vastly reducing the amount of computation needed - operating in latent space (btw that's why the images in this HN post look so cool - the denoising is not in the pixel space!).

[0] https://jalammar.github.io/illustrated-transformer/

[1] https://huggingface.co/blog/stable_diffusion

[2] https://arxiv.org/abs/1906.02691

[3] https://arxiv.org/abs/2006.11239

[4] https://arxiv.org/abs/2112.10752