You'd have to examine the source to find out how that particular extension is blocking ads. In general, the trivial method to block ads on Youtube is to load the video twice. Youtube will not show you ads on a video that you were watching and had to reload the page for some reason. So a Youtube video does not show ads on the second load.
Extensions like adblock use more sophisticated methods like blocked the network request from the browser to display the ad etc. You might want to scope out the Adblock filter lists to see how Youtube ads are blocked,