It's more partial or constrained kerning (you can't leave your "box"), and then on top of that glyphs are being scaled at the same time to take up space "left o

It's more partial or constrained kerning (you can't leave your "box"), and then on top of that glyphs are being scaled at the same time to take up space "left over". In a proportional font it would just be kerned and the overall "footprint" changes.