Files are copied from translators.zip and styles.zip (or, for SVN installs, 'translators' and (for now) 'csl' directories) in the installation directory to 'translators' and 'styles' directories in the data directory. A build_zip file is provided for testing translators.zip (which will take precedence over a 'translators' directory) but isn't required.
The timestamp stored in repotime.txt is stored in the database and is sent to the server for updates since that time.
Updating a file in [install-dir]/translators or [install-dir]/styles automatically copies all files in that directory to the data directory.