It monitors the top 50 most recent Google Groups search results that relate to keywords you're interested in. Any new articles posted that match your criteria will be emailed to you, just like Google News alerts.
Google Groups Alerts are sent via email (no RSS) either immediately (as material enters the database), once a day, or once a week. Since so much content is constantly being generated in Google Groups, it would be a good idea to be very specific with your query terms and/or use some of the advanced search syntax that's available when building your query. You can do this by using the Google Groups advanced search page and then doing a copy and paste of the query string into the Google Alerts form.