[yjftsjthsd-h]

I'm surprised that that's technically possible, actually. Does it just shove the streams into a container format that allows both?

[Aissen]

If you cut at I-frames, you don't need to reencode:

https://en.wikipedia.org/wiki/Video_compression_picture_type...

If you need more resolution, you can apply more tricks, recompose i-frames from the same data, etc.

[ygra]

I think the usual assumption is that both files have the same codec. In that case you can sometimes actually append the streams, or, with things like cuts, only re-encode a few frames until things line up again.