The algorithm specifies how to encode a single pixel, and it would be applied for every pixel in the image to be shared. A pixel P is split into two subpixels in each of the two shares. If P is white, then a coin toss is used to randomly choose one of the first two rows in the figure above. If P is black, then a coin toss is used to randomly choose one of the last two rows in the figure above. Then the pixel P is encrypted as two subpixels in each of the two shares, as determined by the chosen row in the figure.
Every pixel is encrypted using a new coin toss.
Suppose we look at a pixel P in the first share. One of the two subpixels in P is black and the other is white. Thus the first share gives no clue as to whether the pixel is black or white. The same argument applies to the second share. Since all the pixels in the secret image were encrypted using independent random coin flips, there is no information to be gained by looking at any group of pixels on a share, either.