Its installed onto flash memory inside the box, when you power it up it boots just like your PC does only its currently[1] restricted to running the BT code. However it won't be long before enterprising people write new 'improved' software for it that will add new features, increase reliability, etc.
It happened with the Linksys WRT54G router. with people writing new firmware that gave you the sort of features only found on £££££ routers.
You lucky lucky people!!
[1] Give it a week or two for initial versions but wait a few months for better tested versions unless you feel brave