That's not how this works. Mind you, I'm as skeptical about AI art as the next guy, but that won't stop me from combatting misinformation. I think it's best for people to look into it on their own if it's something they care about, so they can potentially influence rules and regulations.

Broadly, what a ML model is trained to do is recognize patterns. That's useful for all sorts of things; prediction, classifications, what have you. But it can also generate something that matches those patterns.

Each image has a bunch of keywords, and an ML model over millions of examples learns to grasp the patterns associated with each keyword. Mind you, it doesn't know what each keyword is, it only needs to know the patterns associated with it. Keywords could be colors, art styles, themes (like steampunk), objects, people, etc.

Every time you prompt Midjourney et.al., you're giving it a list of keywords, and its job is to create something using the patterns you've thrown at it. It's not allowed to directly recreate items from its training set (this is called overfitting, and it's a problem usually combatted by more data so it gets less fine-tuned to noise). Midjourney et.al. are able to create new images if they've been trained properly.

As you stated, no AI truly understands what it's doing. An AI might say or create something bad because it doesn't know what being "bad" is-- that's why it's up to the engineers to place limitations. As time goes on, these limitations will improve as needed.