How does Serviio work?

I upgraded my server a month ago to an HP ProLiant Microserver N54L running WHS 2011 and installed Serviio last night because I was getting fed up with the built-in Windows Media Streaming service. So far everything is working better than expected, with one slight hiccup: Serviio was no longer visible after my server had hibernated overnight and woken back up in the morning. I've told Lights Out to stop the Serviio service when going to sleep and start it back up when waking up. Since all I had to do this morning to get it running again was restart the service manually, this should take care of that problem.
I also noticed that .mkv videos were also listed out (Windows didn't do this). I've heard of on-the-fly transcoding, but I thought the N54L might have been a bit too weak for that, but I was wrong! I had some 1080p Blu-Ray movies ripped to .mkv in fairly high quality, and not only did they show up in the list on my PS3, but they actually played! No conversion needed! Which leads me to my question: How does it work? I've used transcoding programs in the past that basically copy audio and video from one container (.mkv) and remux it into something like .mpg or .mp4, which can then be read by the PS3. Is this what Serviio is doing on-the-fly? I imagine it only worked because I told Serviio to stream everything in original quality, which should actually consist of just copying out the individual streams. Is Serviio remuxing the streams, or is it sending the individual streams to the PS3 without any further modification?
I also noticed that, unfortunately, I cannot fast forward with my PS3 beyond 1.5x because it just stops responding. Pressing play again resumes playback, but this is gonna make watching shows with really long intros (coughGame of Thronescough) really irritating. Any way to deal with this? Do I need to wait for the server to buffer? (I've noticed that MKV playback requires a little extra time to get started)
I also noticed that .mkv videos were also listed out (Windows didn't do this). I've heard of on-the-fly transcoding, but I thought the N54L might have been a bit too weak for that, but I was wrong! I had some 1080p Blu-Ray movies ripped to .mkv in fairly high quality, and not only did they show up in the list on my PS3, but they actually played! No conversion needed! Which leads me to my question: How does it work? I've used transcoding programs in the past that basically copy audio and video from one container (.mkv) and remux it into something like .mpg or .mp4, which can then be read by the PS3. Is this what Serviio is doing on-the-fly? I imagine it only worked because I told Serviio to stream everything in original quality, which should actually consist of just copying out the individual streams. Is Serviio remuxing the streams, or is it sending the individual streams to the PS3 without any further modification?
I also noticed that, unfortunately, I cannot fast forward with my PS3 beyond 1.5x because it just stops responding. Pressing play again resumes playback, but this is gonna make watching shows with really long intros (coughGame of Thronescough) really irritating. Any way to deal with this? Do I need to wait for the server to buffer? (I've noticed that MKV playback requires a little extra time to get started)