As far as I understand this tool works at higher level - with directories and files.
I will try to explain the concept less accurately. For example, you have your favorite os versioned in git. (kernel, x server, apps, init daemon, session management...). This tool will take all the stuff, compile it, will create directory structure and place binaries to appropriate places. In the end it will create bootable directory structure (filesystem tree) to that you can chroot. But maybe you want to test different revision of systemd. So ostree will take chosen revision from git, compile it, add binaries to filesystem while preserve old structure. It will add only new things that are different. Both verisons will be bootable. It's basically binary mapping of git tree.
I will try to explain the concept less accurately. For example, you have your favorite os versioned in git. (kernel, x server, apps, init daemon, session management...). This tool will take all the stuff, compile it, will create directory structure and place binaries to appropriate places. In the end it will create bootable directory structure (filesystem tree) to that you can chroot. But maybe you want to test different revision of systemd. So ostree will take chosen revision from git, compile it, add binaries to filesystem while preserve old structure. It will add only new things that are different. Both verisons will be bootable. It's basically binary mapping of git tree.