The water is forced through the grinds.
The finer the grind the more resistance they give to the water flow.
The resistance to the water is created by the single escape hole in the basket.
This creates false crema as the liquid is forced out like from a garden hose on "full blast" as opposed to "shower".
The force of the exiting liquid mixes with air on the way out and creates a froth that simulates crema.