how do security code readers work such as PIN's at ATM's where you enter each number individually?
ATM Machine PIN pad is already into the realm of microprocessing and most likely are just QWERTY's Numpad parts read into the ATM computer, kind of not what you want to compare against if you want to build a simple key combination circuit.
The circuit in the link you posted works in a "Compare A state to B state" style of approach where the circuit compare what switches are on at the A side (Key Code) compared to B side (Entry) and will give green or red after you push the enter key depends on if it matches or not.
As mentioned by Benta, the switches in this practice circuit is supposed to be DIP switch bank that 'locks' into place.
If you're looking into the wonder of "Press and Hold" using simple push switch, I think it goes into the realm of sequential logics with Flip-Flops and buffer and all the wonders of the digital world
