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They use crowdsourcing:

We're a collaboration of scientists at UC Berkeley and UC Davis and our image labeling engine can take any photo and accurately label it. We use computer vision and an innovative crowdsourcing network to recognize images, and the architecture learns over time, so it gets smarter with each search.

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I figured that this was too good to be true. They seem to be exploiting people with a fairly decent command of English, though.

No, they don't use live crowd sourcing. They mean that they learn from the "crowd" of users. What they wrote is misleading.

I think they do. I am getting different labels for the same thing quite frequently.

I stand corrected. Jesus they do in part.

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