It employs a synthesis of Maps and Camera. I own a segment of roadway that traverses a bus terminal. Whenever I drive by, it registers the speed limit as 10 mph. It will thereafter emit a flashing light and beep for the following 10 minutes, until I drive by a speed restriction sign, which will rectify the issue. Until that time, you are confined, as am I. I have also encountered this when travelling on a 50mph dual carriageway; upon passing under a bridge, the speed limit was subsequently reduced to 20mph, which I presume corresponds to the bridge's specifications. The vehicle enters an agitated state due to excessive speed beyond the limit.
It is a very vexatious flaw.
EDIT: My hypothesis is that it will not update from the Map until it detects another sign, despite seeming to use the map to establish an incorrect speed restriction.