Any changes to files in root directory (/) are gone after reboot On linux, "/etc/fstab" contains the directives how a partition should be mounted (fs type, flags etc.). On Android how it is determined?

On my Nexus 7, I see a file called "fstab.flo" in "/" which contains similar information as fstab does. Just to determine that this file is used by Android during booting, I commented the line corresponding to the mounting of /data partition (With root permission). And booted the device. However, that does not bring any change. Device booted fine, and my changes to that file are no longer there.
Sure not. All changes made there are gone with the next boot: you are just modifying a file on a "temporary file-system" here, which is created on boot, and "gone" on shutdown.

For persistent changes, you would need to change the boot image. As you compare with Linux on a PC, think of a initrd.img (initrd aka "initial RAM disk, or initramfs). The root file system is loaded from this during the boot process (step 3, kernel).

Please excuse me for not going into more details: but how that's done is beyond the scope of this site (which targets end-users, not developers); and beside that I have no practical experience in this specific field.