It shows up in pushing in the parenthesis and pulling common terms out in the expression that is a sum (over all possible assignments) of products of terms.

Doing the summation the naive way will be exponential in the number of variables. The goal is to this in an efficient way exploiting the distributive property and symmetry if any, much like in the FFT case.

This can be done efficiently, for example, when the graph is a tree. (Even if it isn't, one can pretend as if it is. Surprisingly that often works very well but that's a different topic entirely)

Read the paper it's not difficult to follow.