It's pretty clear if you're intimately familiar with Python's slice syntax, but too clever by half otherwise. I've been coding Python since 2000 and can count on one hand the number of times I've used the step parameter in a slice.
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.