To make an analogy to Python: you don't need to recompile Python to interpret new Python programs. Chrome would be like Python: Chrome is itself a compiled program, but it interprets user settings and web pages.

Chrome is allowed to do whatever I/O it wants, but the programs it interprets (like user settings and web pages) are not allowed to do any I/O at all. These interpreted programs are sandboxed.

This isn't really surprising if you think about it. Chrome is already an interpreter for a sandboxed language (JavaScript)