From the whitepaper:
"As part of the stake mining process, the elected node will process the special transaction package from
its memory pool. The anonymization system is a two-pass process flow. If the elected node is
processing Phase 1, it will solve the block and the output will be assigned to an internal address at the
node. The node will earn a fee for this service, and then redeem the input by recursing back to the
election process, to elect a node for Phase 2. The node then constructs an anonymizing transaction
package and broadcasts it to the elected Phase 2 node.
Again in the Phase 2 pass the originator and recipient are not recorded, instead the transaction occurs
between the Phase 1 and Phase 2 nodes."

This is my interpretation:
"As part of the stake mining process, the elected node will process all the transactions that have been sent to it, which are stored in memory (duh). The system uses two passes through two separate nodes. If the elected node is processing Phase 1, it will solve the block and something will be given to the node."

Here I get extremely confused. What is being returned to the node? Since coins are not being destroyed, it appears that it is just staking rewards. This is what it appears to say next:
"This money that is given to the node, on an address in only its control, this is more or less the user's funds. The node is then given a reward for it's service (from somewhere). The user's funds are then sent to another node which does the process again."

Sounds trusted to me.