why is it that when you have a bunch of AirTalks on a wireless network, they essentially behave like they are having their own private party amongst themselves, and no other devices on that wireless network can see them...let alone the devices hard wired to it?
There are two different questions here, and I'm going to answer them in the opposite order you asked them.
1. Why can't other devices see them / why is the party private?
We know that some home network gear doesn't deal terribly well with AppleTalk in various irritating ways. To get around this, AirTalk "disguises" LocalTalk as normal IP, which home network gear knows how to handle somewhat better. The disguising and unmasking of this traffic is what you actually need the AirTalk for. If you see LToUDP mentioned, that is the name of the protocol that defines how the disguising is done. Devices that are hard wired to, say, the same Ethernet/WiFi network as the AirTalks don't see the AppleTalk on the AirTalk network because they only see the "disguised" traffic, and like the crappy home network boxes I'm trying to work around, just treat it as boring IP traffic.
2. Why does the party exist at all?
AirTalk - or LToUDP in general - uses something called IP Multicast. IP multicast allows multiple computers on the same network to form groups, which are kinda like subscriptions: a computer can join a group and will get all traffic for that group, and that's managed by all the network devices in the path. This sounds a bit abstract, but it's also how bonjour/mDNS work in OS X - your computer is subscribed to a group that says "hey send me a packet when a new service appears on the network" and then whenever a computer sends a "hey I've got a new service" packet, that will get to all the computers that have asked for it. If you want a rather strained analogy, you can think of it a bit like digital walkie-talkies - the sending walkie-talkie broadcasts out to all walkie-talkies that are on the same "channel". AirTalks and mini vMac with LToUDP all are on that same "channel" so can send data to each other without disturbing other senders of data, but they can all hear each other without knowing much about each other.
Multicast is actually a fairly ropy technology, and I used it with some trepidation - I will spare you the details why I chose it because they're long and technical and frankly extremely dull. It's a complex protocol suite, because it was designed for a multicast internet that never arrived, and I've been bitten by people using it badly in production systems multiple times in my career. But for this it does make sense, aside from home internet boxes that decide they don't like multicast *either*. Ho hum.