FLoC consolidates the user’s browsing data every week and feeds that into an algorithm called “SimHash”. SimHash runs locally on your browser (preventing Google from directly analyzing all of your browser activity) and assigns a cohort ID based on a built-in set of criteria.
That said, Google currently uses a centralized data hub to analyze cohort sizes and populations, constantly intervening to ensure that cohorts are properly sized and contain a proper distribution of ages, genders, ethnicities, and other relevant traits. Supposedly, user data is anonymized before being analyzed by this centralized service, but there have been a lot of significant issues raised with the amount of personally identifying information that can be gathered from “anonymized” data sets.