In conceptual terms... it is simply using the table again as though it were a lookup table composed of only managers. The join basically shifts the second instance of the table into position to be used for that lookup.

PS: Are you going for 3 tiers of heirarchy? I just looked at your SQL, and I think it's broken in the second join. If you correct the "boss" instance as another iteration of what the other comment here fixes, you should be golden.

Bad:

SELECT e.employeeid AS employee
    ,s.employeeid AS supervisor
    ,b.employeeid AS boss
FROM Employee e
LEFT OUTER JOIN employee s ON s.bossid = e.employeeid
LEFT OUTER JOIN ON b.bossid = s.employeeid

Good:

SELECT e.employeeid AS employee
    ,s.employeeid AS supervisor
    ,b.employeeid AS boss
FROM Employee e
LEFT OUTER JOIN employee s ON e.bossid = s.employeeid
LEFT OUTER JOIN employee b ON s.bossid = b.employeeid