The handicapper estimates what every rider is likely to do based on their entry form details. Usually fastest this year etc. He then identifies the expected winner and makes him the "scratch man", with a zero handicap. Then all other riders are given a handicap being the difference between their expected time and the scratch man's estimated time. On the result board you will have an actual time and a handicap time which is your actual minus your handicap.
If the handicapper is accurate and every body rides to form, everybody would have the same handicap result. But riders improve and the one with the biggest gain will take the prize.
My avatar on the left is me finishing my first 50 in 1967. Wasn't very fast. Did I think a 2hrs 36 mins? But a couple of weeks later, on a new bike, I stormed round another 50 in 2hrs 17 mins and picked up first handicap. I think I won a voucher for about 30/-!