It's pretty obvious.

From what I can piece together, you turn the key to the side, binding the key against the tightest pin, then you push it in to set those key bits correctly, do it again the other direction (bind, push in order to set those) and so on until the bitting is correct, then the lock opens. At that point the key is effectively just the correct key. I don't know how the bitting changes, perhaps the bits are spring loaded and on a slight angle so the pushing causes them to advance to the next position? I'm not familiar with the innards of either the lock or the key so I'm struggling too. The set pins on the back are so you can lock the key in position for other locks with the same pinning (as fast as having a key, rather than picking it each time), and so you could take the key out with the correct bits and duplicate it if necessary. (I went to the website of the company that makes this pick to see if they had more information, but beyond a slightly better direction on how to use it and this part about the set screws, I didn't find out much.)