Complex sentence: The first pair of bits, 01, is discarded since it isn't 10 or 11, the second pair of bits, 10 matches the second rule of the algorithm so we output a zero.
Split into simpler sentences: The first pair of bits, 01, is discarded since it doesn't match either 10 or 11. The second pair of bits, 10, matches the second step of the algorithm so we output a zero.