1. sshd starts and loads the libsystemd library which loads the XZ library which contains the hack
2. The XZ library injects its own versions of functions in openssl that verify RSA signatures
3. When someone logs into SSH and presents a signed SSH certificate as authentication, those hacked functions are called
4. The certificate, in turn, can contain arbitrary data that in a normal login process would include assertions about username or role that would be used to determine if the certificate is valid for use logging in as the particular user. But if the hacked functions detect that the certificate was signed by a specific attacker key, they take some subfield of the certificate and execute it as a command on the system in the sshd context (ie, as the root user).
Unfortunately, we don’t know the attacker’s signing key, just the public key the hacked code uses to validate it. But basically this would give the attacker a way to run any command as root on any compromised system without leaving much of a trace, beyond the (presumably failed) login attempt, which any system on the internet will be getting a lot of anyway.