How does it work?
The same way installing any other OS inside a virtual machine does. Pure Magic!
Umm but the apple circle just keep circling like forever...It is the same thing as if I just boot up with the dvd. I want it to do at least something besides circling...
Well, you weren't very specific in your question. You just asked "How does it work?"
Unfortunately, if you are trying to install an OSX guest, we cannot help you here in this forum, as it could open up VMware to legal recourse from Apple. Google is your friend.