They use networking, typically UDP for most live action games, although they don’t always send/receive as much data as you might think.
A lot of games use something called “client side prediction,” where essentially each person runs the game and the server sends important updates.
Say player A launches a rocket, for example. The rocket’s path is deterministic, so players B, C, and D don’t need updates on the rocket’s position from the server; their machines can just handle the rocket until it hits something.
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