Basically, the V-guitar system uses a hexaphonic pickup, just like on the guitar synths. Essentially a separate transducer for each of the six strings.

This means that it can process each string independently. Most of what it does is merely to sound-model the input from a given string to make it sound like something else when it goes out the outputs. But in addition to sound-modeling the tone and characteristics, it can also alter the pitch. So you can do a true 12-string, or a true nashville-tuning, or any combination of string pitches you want.

You could have the bottom two strings sound like a bass guitar and the top four strings sound like a mandolin. (For example.)

Or have all six strings sound like a specific brand and model of guitar and amp, but have them at your chosen pitches instead of the standard pitch.

Your original guitar has to be in tune, though. For instance, if you call up a drop-D patch, and your E string is a little off, then the dropped D will be a little off, too. It is sound-modeling the output, not mapping it to MIDI or anything like that.