They theoretically are based on copyright, but in practice the way it works is a few trusted entities are allowed to submit content and claim it as their own. If you have access to a Content Owner dashboard, you can claim literally any content you want from there- you'll just be putting your access to that dashboard at risk if you claim content that isn't actually yours to claim and Google gets wind of it.

This is how movies and music are added to the system for copyright enforcement purposes- they are effectively uploaded to YouTube and never published (this is called an "asset" in Content Owner parlance)

People have posted recordings of typing on keyboards so they can file claims and steal ad revenue from anyone whose video has the sound of typing. People are exploiting the bugs in the system.

Youtube's Content ID system is an artificial substitute for actions based on copyright law like DMCA takedowns, because actions based on copyright law have forms and procedures and you need to pay a lawyer to review them. Youtube's system is designed to be so generous to established content owners that they prefer to use it over legal filings, and to have very little recourse for appeal when a video gets taken down.