It uses the DPI setting from X, and you can then adjust the font size to your preference with the gsettings option 'org.gnome.desktop.interface text-scaling-fac

It uses the DPI setting from X, and you can then adjust the font size to your preference with the gsettings option 'org.gnome.desktop.interface text-scaling-factor'. I believe the idea is to set the DPI's in X to the physical DPI of your monitor, and then use this setting to adjust the scaling of elements to your personal preference. That this setting is not exposed in the default config dialogs is a drawback, and an unfortunate result of Gnome's current philosophy. I think you can access it via gnome-tweak-tool though.