GMail Drive works by directly manipulating emails inside your Google Mail account.
When you copy a file to the GMail Drive folder, it internally creates and sends an e-mail to your account. The file content is sent as an e-mail attachment.
When the Shell Extension needs to display a directory listing of your Gmail account, it submits a Gmail search query using the sparsely documented Gmail Protocol API. It searches for all e-mails starting with the word "GMAILFS". From the returned search result, it builds a directory structure, which is displayed in Window Explorer.
Because all GMail Drive files appear as regular e-mails in your Google Mail account, you may want to set up a Gmail filter that automatically moves all e-mails containing "GMAILFS" to the archived folder. This way, GMail Drive files won't clutter up your Gmail account.
A typical GMail File looks like this inside your Gmail account:
GMAILFS: /folder/filename.txt [123;n;1]
You can find the actual file content inside each mail as an e-mail attachment.
The file size is limited to 20 Mb because this is the attachment size limit Google imposes on all mails. Since the filename must be available on the message subject line, the full filename length is limited to about 65 characters.
A bit of care must be taken to avoid sending mails that are caught by Google's spam filter, and to respect the Google Gmail "Terms of Use" policy.