Spoiler: the CD tracks appear as MP3, Ogg Vorbis, maybe Opus? (it's a very old feature) files. Copying one of these virtual files starts the encoding process.
It presents WAV, MP3, OGG, FLAC, CDA & CDDB folders. Copying a folder starts encoding on the fly. KIO also talks with CDDB info providers, so the files come reasonably tagged.
Encoding and tagging can be configured in System Settings directly.
Edit: Why someone downvotes the most innovative CD ripping solution on the planet is beyond me. =)