The List reference named x is passed into the doStuff method, and the result is assigned to the List reference named y. But notice that the doStuff method returns the same reference that was passed in. Drawing a picture can help you sort out this kind of puzzle very quickly.
Thanks all, my colleague helped explain some also...
I want to say again how much I appreciate everyone's responses and help.
I was completely baffled as to how the two collections could relate to each other, when there is not an explicit assignment that says x = y for instance. I think this concept is also something that the new Java programmer has to grasp and memorize like rules for a game like dungeons and dragons or something.