How does wp_list_categories generate the lists?

I’ve been looking through several of the PHP files and codex entries for hours now and I’ve been unable to determine how exactly this works.

I’ve spent the majority of my time searching through the wp_list_categories function code in the category-template.php file, did some trial and error testing, and still can’t seem to affect it.

I would have figured that by changing something like the

• element here:
  ‘
  if( !empty( $show_option_all ) )
  if ( ‘list’ == $style )
  $output .= ‘
• ‘ . $show_option_all . ‘

‘;
‘

to something different (like <ki></ki> or something, just to see if it would have affected the output), but nothing happens. I tried editing some of the other conditionals too, to no avail however.

I also took a look at the walk_category_tree function and the apply_filters function in plugin.php too, but didn’t notice any list generating conditions over there either.

Is there some if conditional that actually generates output or function call that I’m overlooking?

I’m just experimenting with the code for now to see if I could eventually create some custom parameters and arguments for the function later down the line.