The Sirius On Demand library is only offered through the Sirus app on your mobile device. So its not using the Satellites.
As for how that works, it works not much differently than Netflix, Amazon Prime, Spotify etc. If you have a landline or wireless data connection, it works. You may have Sirius On Demand in your car, but that’s because your car receiver is using a wireless cell connection (like OnStar does).
(rarely mentioned tho is that Sirius has ground based transmitters in urban areas to augment the two satellites that your receiver is listening to, in case of building interference etc., I thought that was neat).
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