How does the buying of expired domains to help build backlinks work . I dont quite get what processes are at play with this.
thanks.
You buy expired domains that have links still pointing to them, then rebuild the site as it was or create a new design. The site is then linked to yours with whichever anchor text you want. That's the basic concept.
There is plenty of methods of using expired domains depending on the toolbox you have and if you want to build fast (black hat) or for long term.
You can use them to add juice to your money sites by building websites of the same niche on them and link in deep content article.
Or you can 301 them to your money site.
Or you can build a website on them and sell links.
Or you can build tones of websites based on expired domains and links them together.
Is buying expired domains and makign links on them that apoint to one another like private networking ? I was under the impression I'd get penalized for this from Googl'es perspective.
Well, if you start to think like google perspective, you will have to build a website and wait for people to link it naturally. Good luck with that 
Yes it is like building a private network, that's the whole point of it.
I suggest that you watch this webinar and read stuff there, I'm sure it will help you to understand the basics of expired domains.