It all started off somewhat simply, with the USB port data pins either shorted together or not, then Apple added certain fixed DC voltages on each pin (using resistor voltage ladders) to indicate which power level a charger was rated for. I think Apple has defined three or four discreet charger wattage levels using this method.
http://empegbbs.com/ubbthreads.php/topics/349650#Post349650

Of course the non-Apple and China USB chargers created different ways to indicate charger power capabilities, and with some different power level increments.

We are now at the point where the better USB chargers have a special chip inside which pretends to emulate the 'simple' power signals of each charger type, until the chip finds a pin/signal combo that the 'smart' device at the other end likes and starts drawing lots of current.

So the two ends do a little a signaling 'dance' where each end tries to determine what the other end wants or is capable of. As you can imagine, it all gets more complicated as additional layers of newer specs and USB charging power levels are introduced.

USB-C seems likely to add a whole extra level of 'interesting' to the process.