The mod's creator explained that when passing the Crusader Kings III data to Bannerlord, the mod calculates the size ratio between the armies and limits the battle to a maximum of 1,000 soldiers distributed by both sides. The battle's outcome is then transferred to Crusader Kings III, where you can continue playing as per usual.
It's a mod that uses Mount & Blade II's impressive mechanics to generate a battle for Crusader Kings III. Imagine picking the best of each game to create a new one, and you'll have Crusader Battle. On the other hand, Mount & Blade II: Bannerlord tries to be the most visual and realistic medieval-warfare simulator possible, putting massive armies against one another with all the chaos, visceral combat and bodies that result from it. If you've played Crusader Kings III, you know it focuses on delivering a political and social simulation through complex systems without paying much attention to the visual side of things.
However, it's not every day we see two games being merged into one through modding. By now, most of us are aware of mods that add completely new mechanics and systems as well as community-created assets and even DLC-like content to games.