How does this work?

Question

this code sorts a string into an object adding together the common words.

var word = "Hello World";
var chars = {};
for(let char of word){
if(!chars[char]){
chars[char]=1
}else{
chars[char]++
}
}

the obj now is now {"H": 1, "e":1, "l":3, "o":2, "W":1, "r":1, "d":1}

How does it know to add like characters?
How does it know which is the key or the value?
Does adding obj[anything] transform anything into a object?