Spoiler: the CD tracks appear as MP3, Ogg Vorbis, maybe Opus? (it's a very old feature) files. Copying one of these virtual files starts the encoding process.

It presents WAV, MP3, OGG, FLAC, CDA & CDDB folders. Copying a folder starts encoding on the fly. KIO also talks with CDDB info providers, so the files come reasonably tagged.

Encoding and tagging can be configured in System Settings directly.

In short, it's neat.