How is it that this transistor drives the line such that we get a RESET event?
If the voltage on the transistor's base is greater than 0.7V it will conduct, and pull the reset line low. Otherwise the line is kept high by the 10k resistor on the right. To get 0.7 V to the transistor you actually need another 0.7V to overcome the diode, so a voltage higher than 1.4V on pin 3 of the connector will create a reset. The diode 1N4148 is there to prevent that the base voltage goes too low when the signal is -12V. Such a low voltage might damage the transistor. 

The two zener diodes will clip the input voltages to 5.1V (when the inputs are +12V), or to -0.7V (when the inputs are -12V). voltages higher than 5.1V or lower than -0.7V would damage your microcontroller.