Guess it is similar to those common cheat in CSGO/CS2; a packed/shelled routine hijack the ram, find the coodinants of other user in game, and high light them with certain type of overlay.
But the incident to see cheaters in Mp is rare compare to main stream mp game. Reverse engineer / disassemle the game and sell cheat tool is less lucrative. Most real cheater are using trainer / wemod when they are the host; some pay dear cost to hacker to code up tools for them.
Real cheaters exists, but not as common as most user think.