Although I'm no technical expert by any stretch, but my simple understanding is that the heat exchanger is the equivalent of the "coil" in an air conditioning system, which receives the super cooled (by outdoor condenser) freon into the titanium coil inside the exchanger, and it dissipates that cooler temperature into the water as it passes through the exchanger housing. If anyone has an actual technical answer, I'm confident it would explain the function better (and would be welcome).
The 1.5hp unit we installed on this system is a beast, even with the 2 x 400watt halides and 8 bulb T5.