Print on demand or POD is where a book is printed only when it is ordered. The process is the same as with all publishers, except that vast quanties are not printed in advance, this way the cost to the publisher is minimal. The best exapmle I could use would be with online companies such as Amazon.
Amazon display your book on their site and then when a customer puts in an order, Amazon inform the printer designated by the publisher and they print the book and forward it on to the customer. In the case of a book retailer in the high street they again put in an order usually for small amounts and the printer then prints and despateches the books to them.
Because the book is only printed on demand eg.. an order placed it saves the costs of printing large amounts in hope of sales, many of the self publishing firms use this model, and now some of the larger publishers are moving into it as a means of reducing costs. It does look like with advent of digital books, this will at some point become standard in the paper book printing industry. You can look up Lightening source Uk Ltd on the net for greater depth of information, they are the company that print my books, sorry I dont have their web address, but I have at some point found them in the past by using google search.

I hope this helps, please let me know if I can give you anymore help or info… Robin