It's pretty clear if you're intimately familiar with the Unix command line, but too clever by half otherwise. I've been using Unix since 1994 and can count on zero fingers the number of times I've needed to slice input through a pipe like this. :-)

Also, just to make sure we're on the same page:

The command `ppp` (found somewhere in PATH, unless it's a shell function or an alias, but we believe it's a symlink to `pypipe.py`) receives `pypipe\n` on stdin, sets a variable named `line` to `pypipe`, uses the slice notation to convert that to `ppp` and then prints `ppp\n` to stdout.

I think it's to show you were the name comes from. :)