Here's how it happens. You have a little group of seven stitches on your needle (which become nine for a while). You also have the rest of your knitting, on its circular needles (that extra shiny one is one end of this bit) dangling below the bit you're working on, all wriggly ....
at the end of every other row, you knit the final stitch together with the next stitch on the main piece, so you're trying to handle three needles and two bits of knitting with only two hands to do it all.
It's all rather finicky to start with as the circular needle that holds the lace squirms about and wiggle waggles like a live thing, and the little needles that hold the edging threaten to slip out of their stitches at every turn. You also have to make sure, after the knit the two bits together bit, that you push the stitches on the circular needle right back so they don't slip off while you continue with the edging. I finally I got the hang of it and now I am almost half way there.
It's all coming together rather nicely, and the best bit about it is that you don't have to count the repeats; you know when it's done, because there are no more stitches on your squirmy circular needle and you're back to where you started again ... or at least, I hope that's where I'll be!