How can E. coli affect C. elegans expression?
Yes, as bizarre as it may seem, that is what happens. The E. coli express a double-stranded RNA hairpin (under the regulation of an inducible promoter), and the RNA contains a sequence derived from a C. elegans gene.  When the worms eat the bacteria they grind them up in their pharynx, and release the cell contents (including the induced RNA) into the worms' gut. The gut cells are able to absorb the dsRNA  and transport it to other cells as well. The RNAi pathway processes the inhibitory RNAs to down regulate the target gene.