Regular expressions are patterns used to match strings. They are first parsed into postfix notation and an NFA is constructed from the postfix expression. The subset construction algorithm is then used to convert the NFA into a DFA, constructing a transition table. Finally, the simulation engine uses the transition table to process target strings and check for matches. Key algorithms include infix to postfix conversion, Thompson's algorithm to build the NFA, and subset construction to convert the NFA to a DFA. Data structures like stacks, graphs and transition tables are used.