The first important thing to notice is the order of rendering of elements. The globally valid rule for SVG files is, that later elements are rendered atop previous elements. The further down an element is the more will be visible.
The text "SVG" is drawn. The interior of each letter is filled in with white. The text is positioned by setting an anchor at where we want the midpoint to be: in this case, the midpoint should correspond to the center of the green circle.