Paste a hash and the tool inspects its length and format to list the most likely algorithms that could have produced it.
It examines the length, character set and any prefix (like $2b$ for bcrypt) to shortlist the algorithms that match.
Not always — many algorithms share the same length. A 32-character hex string could be MD5 or an NTLM hash, so it lists candidates.
No — it only guesses the algorithm from the format; it does not attempt to reverse or crack the value.