
Generally, files are just copied to the same directory as where the syssrvce.exe on the CE device has been started from. While transporting, a folder "Update" is created in the folder where the syssrvce.exe has been started from, which will contain the new syssrvce.exe and optionally the new zenon6.ini, after the first step of the update. (as the syssrvce.exe is running on the CE device, it cannot be overwritten, hence the folder "update").
On the second step of the update (when you click process again), the syssrvce.exe on the CE device is stopped, the files from the folder "update" are copied to the parent folder (overwriting the files in here), the folder "update" is deleted after that, and the new syssrvce.exe is started. Since 7.11 it will do that automatically.