Either an internal overflow (Think of a partition around the holes) or the holes have pipes attached to them and go to near the top of the water (Less common) to keep the water from draining below a certain level.
The best way to understand how it all works IMHO would be to go to a LFS (Good one, not PetCo) and look at some of the Reef Ready tanks (The term "Reef Ready" is synonymous with pre-drilled with internal overflows)
Generally, there are two holes per overflow, one to drain water down, and one to attach the plumbing to bring it back. Larger tanks tend to have multiple overflows, with 2 holes each (Mine has 2 overflows, one on the left, one on the right, each with 2 holes each in them)
Clear as mud now? :wink: