No problems at all Will. It's a little bit of physics to understand how it works, but I'll try to put it as simply as possible. Let's start with the second question:
If you look at the picture below, you can clearly see the piece of glass I put in the corner. My tank is 14 inches tall, that divider is 12 inches tall. So when my pump raises the water level above 12 inches, the water overflows into this corner compartment. It skims the protein layer forming on the surface as well as small floating debris. I added the plastic mesh later because of the size of my fish, they could go over easily, and I caught a shrimp walking on the edge today. An advantage of this is that my tank's water is always the same. Evaporation, water changes, adding or removing stuff from the tank, or anything else that would affect the water level of a tank with only, say a sponge filter, changes the level in my sump, not in the tank. The compartment also acts as a buffer, absorbs sudden changes, as when putting a large object in the tank.
This leads to your first question, what happens to the water in that section?
This is a flattened overflow:
It sits on the tank rim, left being in the tank, the right side being out. Before fitting it, I mentioned above that I primed it, which consists in turning it upside down and filling it with water. Once full, I flipped it back. The water is stuck in because there is no air gap left. Gravity now equalises both sides, the two "U" at the bottom. When water is added on the inside pipe, the level rises equally in both sections. That tall pipe is there to vent the section outside the tank so it remains at atmospheric pressure. As the level rises on both sides, the water eventually reaches the "T" on the outside and drains down to the sump.
Since it's not actually siphoning, but draining the excess, anytime the water level in the intake pipe gets lower than the "T", the flow stops. You add a glass of water, water will flow out until the level goes back down under the "T".
The flow rate of water going down along the glass panel in the picture above is exactly the same as the flow rate in the clear pipe going to my sump here.
I hope it helped.