Your understanding of Polylith is essentially correct. It is a combination of existing ideas, such as monorepos, convention, components, interfaces, encapsulation, and static code analysis. However, I'd argue that what emerged in Polylith from those ingredients was more than the sum of its parts - due to how those particular concepts resonate with each other.

For example, because of the forced conventions, it's trivial for the Polylith Tool to perform static code analysis on a Polylith codebase. This means that the tool can identify the subset of tests to run, based on the components that have changed since the last run. Which leads to a fast-feedback loop, and encourages both good testing practices and fine-grained component modularity.

Polylith gives you a system-level architectural building block; the component, which encourages a modular design and separation of concerns. However, you're right that it's still possible to create spaghetti code with Polylith. All it would take is poorly designed components, with bad names, multiple reasons to change, and exposing their state everywhere. However, I'd argue that when you give someone a well designed tool (like Polylith), then they're more likely to craft a well designed product with it.

To understand how builds and deployments work with Polylith, I'd recommend reading the "Workflow" section in the Polylith Tool's documentation: https://polylith.gitbook.io/poly/workflow/shell (especially "Build", "Git", "Continuous Integration", and "Testing").