The custodians hold funds on BTC and mint / burn WBTC on Ethereum. They are centralized entities, and when you deposit BTC with one of them, you are trusting their servers and software to issue you the corresponding amount of ERC20 tokens at the market rate.
The major difference with traditional custodians is that you can verify the BTC held in trust (i.e. you can perform your own audit) using this dashboard
The largest custodian holds about 520 BTC at the time of this writing (more than 4m USD), and you can inspect all of its incoming and outgoing transactions on BTC
to try and correlate them with the WBTC contract on Ethereum
The Etherscan contract says it has a "Fully Diluted Market Cap" of
$4,676,998.42 in outstanding issued WBTC tokens.
Compared with the wbtc.network total of
$4,720,890.03, so you would be able to track the ~$50k being settled.