It doesn't understand English. It knows how to make up text that looks a lot like the text that it read. It read a lot of examples of code, so it know how to make up code that looks a lot like what it read. Some of this code works, since some of what it read works. But if it read too much non-working code from stack overflow questions, it might write code that doesn't work.

Edit: apparently it read a lot of Github repositories, so most of what it mimics is working code.