So how does this work? Does it somehow boost "willpower" so we can rationally decide which substances we want to consume? Does it somehow smooth out the negative moods that lead us to snack/drink/sleep around/inhale/..? Does it mess with "desire" in general?

On possibility I've seen raised is that slower GI movement -> slower alcohol uptake -> not getting as much of a "hit" from drinking as the effects come on more slowly.

In my personal experience, I do still get the same hit from drinking–I feel a buzz almost immediately, same as before. Rather, I just don't feel the "urge". I've never been a heavy drinker, but I would occasionally crave a beer or two, particularly at the end of a work week. Also, drinking on a GLP1 (I've been on both Tirzepatide and Semaglutide) absolutely wrecks my GI tract for 24-48 hours. Usually with an onset of maybe 8 hours, I get horrible heartburn, moderate to severe nausea, and even mild diarrhea.

I don't think it's any one thing. People like different kinds of alcohol, for different reasons. For someone who's alcohol cravings are based on the sugar in their preferred alcoholic drink, it isn't surprising then, that a medication that lowers their desire to ingest sugar lowers their desire to drink (their chosen sugary drink). Naturally this doesn't cover all alcohol drinkers, but it can't also be none of them.

My understanding is it essentially tamps down cravings.

From my experience, yes, these things as well as making you feel sick and full quicker illicit the same feeling for me as building consistency and routine and grinding it out and a sense of self pride - you know that feeling when you are heading in the right direction and are able to take the harder rather than the easy option deliberately. It's pretty strange that a drug does this and I wonder if coming off them you then find making difficult decisions harder than before because you were faking a muscle normally built through hard work, one of the reasons I decided to stop taking them.