You type the passphrase, or the OS keyring hands it over on a device where you chose to remember it. Nothing leaves the machine either way.
PBKDF2-HMAC-SHA256 runs 600,000 iterations over the vault's own 16-byte salt and produces a 32-byte AES key.
The key lives in memory behind a lock and is zeroized on drop. An idle watchdog locks the vault after a timeout you set.