The short explanation
A device in the middle of the chain can read the display's EDID exactly as a source would, then store it. From that point it knows what the display can do without having to ask again.
Where you run into it
A stored copy is available when the real thing is not. The display can be off, asleep, or switched to another input, and the source still gets accurate information about it.
It is also how you find out what is really being advertised. Comparing what the display sends against what the source finally receives shows you exactly what the chain in between is doing — which is usually the whole diagnosis.
How the DR HDMI 8K handles it
The DR HDMI 8K sniffs both the sink EDID and the Dolby Vision data block automatically, deciphers the DV block into readable form, and can carry the stored version into an AutoMix EDID. That is what keeps Dolby Vision working with an AV receiver in the middle: the display's own DV information is preserved even though the receiver never passed it on.
Want to test your own HDMI chain?
The DR HDMI 8K is sold through the HDFury.eu web shop.