This week's book giveaway is in the OO, Patterns, UML and Refactoring forum. We're giving away four copies of Refactoring for Software Design Smells: Managing Technical Debt and have Girish Suryanarayana, Ganesh Samarthyam & Tushar Sharma on-line! See this thread for details.
The operands 2 and 5 are not being added, although addition in this case produces the same result, which may be confusing you. The operands are the individual bits that represent each number in binary notation, not decimal notation.
Here's another example 2^3=1.
The ^ XOR operator works at the bit level, so convert the decimal numbers to binary: 2 = 0010 3 = 0011 ^ = 0001