See the diagram in Vignatti's blog. From the point of view of the remote X client, the local X server is no different than it's always been. The client sees a remote server IP address plus X-server port number with a socket waiting to accept connections. This socket is initially managed by Xwayland, until the connection event causes it to fork an Xorg server, which takes over the socket and handles X protocol events as it always has done. Further clients are handled by the Xorg server right from the word go.