How does nth-of-type know what parent?

so, basically, i get nth-of-type, but i don't see where a parent element is designated or even comes into this (except in the sense that i can't make a div in html without it being inside a parent element anyway)

As near as i can figure div:nth-of-type(2) for example, is just selecting the second div element out of all divs, because the "type" that the nth is targeting in this case is "div". I don't see where it is specifically targeting divs that are children of the body...

i guess what I'm really asking is how does it know which parent element this is a child of if you don't actually say that? or do we only use this if we are not wanting to exclude any of that type from the selection? (or can we additionally use it more specifically such as something like this: p.explanation div:nth-of-type??)

yup, very confused. maybe I'm just too tired... what am i not getting here?