I used to contribute to the project back in v1 days. I'm not sure if the architecture has changed since then, but basically it worked by compiling the game logic as a kind of byte code that got interpreted at run time.
The trick is that a lot of the heavier stuff is implemented in assembly and this is mostly used for scripting (from what I understand).
Ahahaha. But my understanding was that they wanted it to be somewhat field programmable? You can tediously write in a program with all the VERB NOUN stuff?