How does search work? What is search algorithm?

Search functionality is provided by MySQL full-text searching. This is a natural language search that allows you to type in a question or regular sentence that describes the information you are looking for, and then uses programmed logic to determine the keywords in the sentence.
See here for details Boolean Full-Text Searches.

Optionally you can set KBPublisher to use Sphinx search engine. It is a full-text search engine that provides fast and relevant full-text search functionality.
See this article how to enable it.