Well basically mendix is a model interpreter that interprets the model that you create in the modeller. This model is translated to a form of java, not completely java, that is interpreted by the XAS of Mendix. Because there is no way to intervene in the interpreting process Mendix distinguishes itself from existing products that just generate code.
Older code generating products allow users to see the code that is generated which makes it more prone to mistakes or problems during updates.
However, what the full technical details are and how it works below the surface i do not know.