Can someone explain how multiple domains hosting is possible technically? How hosts like cpwebhosting.net allow this with limited disk space?

If you’re referring to them allowing you to host unlimited domains, that’s within your alloted disk space. So, while they put no direct restriction on the number of domains you can host.

Domain are hosted in diffrent subdirectories and each of them points to its own folder in the main account. The site owner can host as many domain as they are allowed by their web host.

Disk quotas is how the amount of disk space that can be used is set. All domains can be hosted on just one IP address (except in cases of SSL’s).