A geofence is a virtual perimeter for a geographic area. Once you've set your geofence radius, your smartphone determines if you've crossed from one side of your geofence boundary to the other. Apple and Android have unique, proprietary methods of determining when this happens. When you are logged in to the Lyric app, the Lyric service receives a notice from your smartphone that your phone crossed the boundary.
Lyric is not aware of your location, just that you crossed the boundary. Often, the geofence crossing happens at a predictable spot on your commute or while you're out and about. The exact spot, however, depends on a variety of conditions such as cell tower locations, other apps you have open on your smartphone, etc).
For more information, please watch this instructional video: