Well, at the risk of oversimplifying:
The ALMR system, just like most radio systems out there is comprised of many sites or repeaters that can and are interconnected by one or more ways like telephone lines, microwave links, fiber optics, Internet, satellite, etc. In the case of the example you provided, the person's radio talking in Seward will be affiliated to the nearest or best reception site the radio can find at the moment they transmit. His transmission on the specific talkgroup he's using will ONLY be transmitted on the sites that have radios afilliated to it AND are also tuned to the same TG. So the person's radio in Kodiak affiliated to a site and tuned to the same talkgroup will be able to hear the transmission from Seward BUT so will someone in Fairbanks or for that matter anywhere in the state that's also tuned in to the same TG. The way the system knows how to properly route the radio traffic is by way of a centralized computer that serves as the "traffic referee".
So in other words, if the two people talking on that specific TG or channel are the only ones talking on it, the transmission will only be transmitted on those two sites or repeaters that the said radios are affiliated to (One in Seward and one in Kodiak) and you will have to be within reception of either site to hear it because it won't be transmitted system wide or statewide.
Of course, with that said, then you can throw in many variables depending on how the radios, the system and TGs are setup and you might have TGs that are transmitted area wide when used or TGs or radios that are only allowed on certain sites or geographical area and so on.
And that's the "oversimplified" explanation! LOL