As far as know this is all OVN specific functionality Incus is using.
From memory the feature is called OVN Interconnection that needs to be configured or better is configured by Incus. It is only required if you want to connect two OVN network across different data center or like the case you pointed out where there are more than 252 networks on one bridge.
OVN handles all the routing etc. and talks TCP between the OVN networks. Works pretty well for me connecting multiple networks on different sides of the globe.
The Incus documentation section I previously mentioned just says:
Therefore, Incus allows creating peer routing relationships between two OVN networks. Using this method, traffic between the two networks can go directly from one OVN network to the other and thus stays within the OVN subsystem, rather than transiting through the uplink network.
It didn’t say how or what actually does that functionality but the way it is worded somewhat implies Incus itself is doing some magic on its own to accomplish it.