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Is there only one winner in this system?
That's a separate question.
STV with a single winner is like holding multiple elections where the biggest loser gets eliminated each round. You can vote for your favourite uncle first, because you'd really like him to win, but because you've put other people at 2, 3 and 4 you still get a say who wins even though your uncle only got 7 votes. Your Single Vote gets Transferred to your next preference when he's eliminated.
STV with multiple winners is the same but you stop eliminating people when you're down to however many you need.
No, basically every riding has, say, three representatives, and there's a threshold that each party needs to pass to get elected, here's an explanation that's better than what I could come up with:
https://www.youtube.com/watch?v=l8XOZJkozfI
Ends up very proportional while conserving local representatives, although personally I prefer MMP