Here, it would be fair to describe what's going on as OCR with the glyphs not being fixed in advance, but rather being discovered on the fly by the algorithm. The entire concept is to identify sections of the image that "show the same thing", and replace the data in those sections with pointers to a single representative patch. That's really not so different from compressing image data that looks suspiciously similar to a capital A down to the one byte 0x41. It's just that different image sections are being Optically Recognized as "similar to each other" rather than "similar to this hardcoded reference glyph".
"Generating a font from the image and replacing the original image data with that" is a very good description of what's going on here.
[1] Or numbers, or symbols like parentheses. The basic concept is letters.