More or less, it sets up an EXT4 partition on the SD card and turns on journaling, puts a sym link to the partition in the actual internal /cache partition for extended space, then pushes the cache and dalvik cache into the new partition as well. All fine and dandy until you wipe the internal /cache partition when flashing something new and your shiny link gets hosed.
I think I'll be looking into the Dark Tremors mod some more. I had used the Data2SD mod that the_maplebar described on this forum and it is a cute hack, but completely half-assed when considering how we may use or alter our devices. No offense to those who have explained it or used it, but it is not very well thought out. If you use the recovery to wipe the cache or dalvik cache as most ROM's and mods direct, you may find what is left of your system a broken mess. I did this and played around with it quite a bit tonight, backing up a Reborn install with this mod so as to try out TheKraven's CM7. It only complicated matters. Performing the process again fixed some things, but still evaporated some apps and created some FC's. I suppose if you have committed to a ROM install, then it will work fine, but if you expect to hop, then maybe consider other options.
And to answer your question more directly, what happened on my device is that the internal memory somehow filled up so that 10MB remained and a bunch of things that I did not expect went to the EXT partition. Either way, I know that my explanation is rudimentary and I wouldn't mind at all if someone could provide more details as to how it works.