It plumbs in line with the heater hose, and either a thermo syphon, or a very low power 12 volt pump, moves the heated coolant through the whole block. Apparently they are popular on large diesel trucks and busses to keep them warm over night, and keep the cab warm too (the other option is to leave them running continuously all winter, which is what alot of places still do). From what I've read, the larger ones can keep the coolant almost at normal operating temp, unlike the electric block heaters.
But I've never used them, so I don't know for sure....