>if this system was able to understand how to make code better you could keep training it until you had perfect code

Based on the FAQ, it looks like some information about how you interact with the suggestions is fed back to the Copilot service (and theoretically OpenAI) to better improve the model.

So, while it may not understand "how to make code better" on its own, it can learn a bit from seeing how actual devs do make code better and theoretically improve from usage.