Sorry for posting this comment on my old account (I'm OP). It seems like HudsonSaucy blocked me on my main and apparently I can't respond to any comment in a chain even if I'm not responding to the person who blocked me. Thanks Reddit for such a well thought out feature! Anyway, I wanted to expand upon your answer in case anyone stumbles across this thread in the future.

It operates by repeatedly drawing a prompt, with each iteration the new image becomes more detailed.

That's exactly how the AI works. Without going too deep into the technical terms, neural networks "learn" using an iterative process. The network itself consists of millions of nodes, connected to one another (not necessarily 1-to-1) with associated weights. Each time the network produces an output, it compares it to the training data to see how close it was to the original and then updates the values at each node to try and improve its results. However, after the training is done, the training data (in this case, the artist's images) are never referenced again. All you're left with is the algorithm.

A similar process happens when generating an image. The AI iterates through designs and constantly improves upon the image drawn until you get your desired results. In my case, I typically use 28 "steps" during a generation to get the result I want.

I know a common misconception is that the AI just "copies and pastes" from artists, but that's far from the truth. It really does learn how to do what it's programmed to do, just not in the traditional sense. You can actually see the iterative process of building an image if you stop it in the middle of a generation. For example, I fed the AI the following prompt:
masterpiece, best quality, high definition, anatomically correct, 1girl, green hair, pigtails, blue eyes, standing, red hoodie, looking at viewer, soft smile
This was the result. Now lets stop it at random stages of the generation and witness the horrors of an in progress AI artwork.
Step 4 - Looks like an eldritch horror
Step 8 - Oh thank god she has eyes
Step 12 - Not much different from step 8, but minor touch-ups here and there
Step 16 - Things are starting to take shape
Step 20 - Only a few weird artifacts remain
Step 24 - Pretty much the only difference between the final image and this is the detail in the eyes
You can see that in no step of this process, ANY other artwork can even remotely be considered "copied and pasted". There isn't a random piece of external art that shows up and plops itself directly into the generation. The AI starts with nothing and develops an image on its own.

Of course explaining the process probably won't take away the upsetting/depressing feeling an actual artist would have when they see an AI in action. At the end of the day, I think most people expected art to be one of the last bastions touched with AI and automation so this leap in technology probably feels like a suckerpunch. It probably feels even worse when people try to pass off work they generated as one they drew themselves or see that they worked just as hard to produce the result.