How does lan work in Minecraft pc?

LAN play works similar to online play with a few exceptions.

1) The person who is hosting (the one that enabled LAN play) is handling the all the world information (chunk updates) for all players in addition to the host's actions.

2) There's virtually no lag between the server & players as they're on the same network. Ping times will be practically 10 ms or less for everybody. Any lag in the game will be host computer trying to handle anything major in the world (like a massive redstone mechanism that's running).

3) If the host leaves the game, all other players are kicked out of the LAN world.

That's pretty much it. Anybody who's on the same router can hop into any open world.