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Component composition works great in Polymer - it's just the Shadow DOM spec: child elements are distributed into the Shadow DOM via <content> tags. The result is what's called the composed tree.

Because standards, you can compose Polymer elements with native elements or custom elements built with or without a helper library like Polymer.

What part is confusing?

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Not so much confusing as my own ignorance. My last pass through Polymer was two years (I think) ago and there's been a number of changes to the components specs that I've been ignoring. At the time I saw a lot of excellent examples/docs related to encapsulation and none related to content insertion. I'll take another look later this year.

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