it is magic. :)
i dont really know how to explain it. functions DO stuff. but i can tell you that all of thematic's functions (its guts) are located in the library/extensions folder. then for example if you open up the content extensions file you will see all of thematic's functions for creating the content... from the post-header (date, author,etc) to the post-footer (tags, categories, comments), the loops for all the different types of pages, etc.
thematic has a bunch of "hooks" which are places you hang code. when the server processes all the php it goes in order through these hooks and processes whatever function is attached to them. to override a function, you actually first need to remove the thematic function from its hook. write your own and then add it back to the same (or a different one if you want) hook. this is why i spend a lot of time in the library folder. if i want to just tweak the postheader for instance, i will go and copy the entire thematic_postheader function into my functions.php. then i will make a minor tweak, rename the function, remove the original and add in mine.
if a function returns a variable, you can use add_filter to change it w/o unhooking and rehooking a whole function.
remove_action('hook where it is located', 'function you want to remove');
add_action('hook you want to the function to appear on','my_new_function');
all that said, thematic does have several 'empty' hooks that you don't need to remove anything from before adding your own function.
i'm gonna stop now b/c i am starting to confuse myself. but i always send people to this website as it helps visualize what is going on