How they work is the are hidden under the dash, usually with a Y cable running off the OBD2 port just for the power feed. Just plug and play, about a 5 minute install. The devices cost around $100. For a bit more you can get one with a battery back-up, so if the car is left abandoned, it will signal the dealer the vehicle battery is now dead and here is the location. usually once a day (often 23 hours apart) they send their location, so after a few weeks you know the car's typical location day and night.
Many times the customer is not told at all. It's still a grey area if this is legal since the car is property of the dealer. Once the car is paid off the device (and monthly service charge) is disabled. If the customer is told, it's not made clear what the device is used for. There will be a line in the sales contract saying - your vehicle may include an anti-theft device - That's all. What's not said is the anti-theft device only benefits the dealer, and will be used so the repoman can come pick up your car.
In the dealer defense, buy here - pay here customers are the bottom of the credit barrel and no big name dealer would touch them. They will have 1 or more repossessions, maybe 5 or more accounts in collections, a bunch more of charged off accounts they just gave up on and maybe an eviction from their last apartment. So the dealer knows they don't like to pay for things they buy. There is only about a 50% chance they will actually pay off the car they are buying.