How are skins mapped in the game?

I know it's an overlay, but how does the game know where to place the skin? I found out there's a carname_c file in the vehicle's directory, which I'm assuming is how the game maps the skin, but it doesn't really make sense to me. How does it know the white in the _c file is where the skin is placed?
Edit: I know there's a wiki page that shows how to skin, but it doesn't explain the question in full detail.