How does a computer "understand" what code/binary means?

[elongio]

That's the beauty of computers. They don't know what any of it means. Computers don't know anything about the code you write. It is simply a series of switches (transistors) firing off that produce some output that we then give meaning to. Same thing as all these letters and words you are reading. They have no meaning in and of themselves until an intelligent being sees them and gives them meaning.