How does this SIM card reader circuit work?
What you should ideally link to, as well as the useful top page, is the circuit diagram., as that is what you are inquiring about. It is found here 

A lot of the content in your questions would be addressed by readin their FAQ well and/or by looking on web for IM card informatiin.

In their FAQ they say:


Is this a PC/SC-compatible SIM card interface?
Is this a Phoenix-compatible SIM card interface?
This design uses a serial port to read and write data from a SIM. Often these are referred to as "phoenix"-type readers. PC/SC readers use a different (Windows-only) standard, and this reader design will not work with software or hardware that requires PC/SC compatibility


"Uses a serial port" and the circuit diagram should give you an immense guide.

Look at the circuit names on the SIM card.
 Only on is data related, and that is named "I/O".

DATA IN:
This pin is driven by Q1. When Q1 is on the pin is pulled low.
 When Q1 id off the pin is pulled high by R3.
 That action allows data to be sent TO the SIM.

DATA OUT
 And, when Q1 is off, if the SIM toggles the I/O line then R3 will be pulled low by the SIM (Q1 has nio ffect as it is off) and FTDI-RX line and IC1d both "see" this data from the SIM.

So, that covers how data can get to and from the SIM.
 The rest is a matter of specifications.
 A lot on this will be in the FAQ and more via eg Gargoyle.



Circuit diagram: http://www.ladyada.net/make/simreader/simreaderv1_0.png