How do they develop my digital pictures?

I have been using a digital camera for some years now but never wanted to pay the price to have my pictures printed on the Kodak PictureMaker. Now stores like Wal-Mart and Walgreens have a new system that allows you to upload all your pics to the system and in an hour they are developed on regular Kodak/FujiFilm photo paper. How does this process work?

In most of their stores, Walmart does 1-hour prints on a Fuji Frontier system. This is a hi-tech, complicated, expensive ($250,000) machine that develops the negatives, scans them in, and the prints the digital image on photo paper using 3 colored lasers. The digital step is the usual one, the traditional way to develop is to just shine a light through the negative and project it onto the photo paper.

A benefit of this system is that they can easily and cheaply print your digital files by skipping the negative developing step entirely.