How It Works 
tl;dr
The internal /api/__api_party server route acts as a proxy between your Nuxt application and your API. This keeps your API credentials safe from the client and eliminates CORS issues.
The generated composables initiate a POST request to the Nuxt server route /api/__api_party. Request details are sent in the request body as JSON, including the target API route, HTTP method, headers, and body.
This internal server route initiates the actual request to your API. The response is passed back to the client. This way, every API request is made server-side, protecting your API credentials and avoiding CORS issues.
During server-side rendering, calls to the Nuxt server route directly call the relevant function (emulating the request), saving an additional API call.
API Response Metadata
The proxy layer passes through your API's response body, HTTP status code, HTTP status message, and headers. This lets you handle errors gracefully and access metadata like rate limit headers.