I'm just curious how processing work internally. How is the draw function implemented? Is it a Thread that will constantly loop or some sort of call back function? Where can I find some info about that?

A main Processing thread loops through draw() as quickly as it can execute the method. How fast it can execute all the code executed in the draw method controls the sketch's frame rate, usually expressed in frames per second. You can lock the frame rate to a lower frame rate than would naturally occur with the frameRate() method, prevent looping with noLoop(), and start and stop looping with other methods.

A separate thread watches for user input events. Event handler methods in Processing capture these events and set various variables, like mousePressed, for the next execution of draw(). In some cases, they also invoke call back methods such as mousePressed() that you can override with your own custom logic.