It runs hundreds of millions of simulations each second. Take KQ vs AJ on AQ4 flop, it will run through every possible turn and river:

2c3c
2s3c
2d3c
....
9d 5s
9d 5h
....
AhAd

and add up the number of times each hand wins or loses. For preflop against a couple of random hands, this can be a trillion or more possiblities. The good thing about PokerStove is that it's optimized to eliminate certain cards which are blanks or equivalent, which makes it run much faster than traditional simulations. It still looks at billions of possibilities though.