If you use the "Evaluate Formula" tool in the Formulas tab, you can step through to see what's happening.

The Search() part does what you expect and is seaching for any of the B1:B5 entries in A1. The 1/ part converts any entries to values of 1 or less and leaves errors as errors.

The Lookup(2.. part looks for the last time that a value of 2 or less is found in the result array, and it then aligns it to the location with B1:B5 to return the corresponding result.