How do self-adjusting hydraulic disc brakes work?
I think the answer he was looking for was how they adjust as the pads get worn.  There is a check valve in the master cylinder, that will allow enough fluid from the reservoir when the lever is pulled.  If more fluid is needed because of pad degradation, it passes it into the active system.  Therefore with more fluid in the system, the piston is pushed out slightly more and the pad is the same distance from the rotor.

That is why your res. needs to be topped off occasionally.