Does the software look at two things at a time. Or compare one thing to the whole universe of what has been written since the beginning of time?
It varies, as the 'school' tools typically looks only at coursework term papers, but it's essentially the second. They search for other works which the one piece may have originated from. There are some more advanced tools, used mainly for legal challenges, which breaks down two pieces of writing, pointing out similarities in styles and documenting just how different two writing samples are.
However, I've never actually used any of these, so aside from some general knowledge, I have no real experience with any of these tools. As I stated earlier, most times, when someone steals your work, it's obviously it's stolen, as they make no bones about it at all. They typically leave my name emblazoned across my cover, while claiming to 'own' the work while using another name and email address.