It works by toggling a GPIO pin on and off. This results in a square wave carrier signal, which means you get an infinite stack of odd harmonics - 3f, 5f etc. This means you're not just transmitting on the frequency you meant to, but on every odd multiple of that frequency (with correspondingly decreasing amplitude of 1/3, 1/5 etc) all the way up the entire spectrum.

It's very easy to accidentally clobber something like that. The only reason regulators haven't come down like a ton of bricks is the amplitude on PiFM is really too small to be very harmful - you're unlikely to mess up anything beyond the range of your own home, maybe your neighbors. If someone with a little knowledge tried to hook it up to an amplifier however, they're gonna have a bad time real darn quick...