The soil doesn’t go anywhere. It’s still there. Soil is not a rock solid material. It is actually comprised of 20-30% air, so as the roots grow and spread, they simply compact the soil. They get rootbound when they can’t grow anymore and basically give up trying, or grow out a drainage hole (which is why removing a root bound plant from its pot can be very difficult).
Squished. It gets squished as much as it can, then spills over sometimes. You see, ground can be pressed down really hard and it will take up less space. Thats not good for the plant because water and minerals cant go freely. When the soil cant be compressed anymore, it gets pushed out of the pot little by little. Plants grow slowly, so there is always plenty of time for small bits of soil to move about with water and such.
A combination of compressed, decomposed and absorbed, or washed out the drainage holes in the bottom after watering.
Its also worth noting that a lot of times a rootbound plant is forming more a “cage” of roots rather than a solid lump. Roots spread out primarily, hit a wall, and then start going around rather than back inwards, so a lot of the original soil is likely inside the rootball still.
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