is it the concept of Vgs that's bothering you?
If the uC pin goes to 0V then you have 3.3V across the resistor R1 that goes between the MOSFETs
Gate & Source, which means Vgs = 3.3V, MOSFET conducts. this means that the MOSFET then
SINKS the 5V side to 0V too through the uC pin that is at 0V.
Imagine that this circuit where the 3.3V signal is grounded
its a similar thing, the uC is not seeing the 5V signal when in this situation. The point at 5V signal will be 0V from the uC IO.
And vice versa. when uC IO goes 3.3V again, the voltage across R1 (Vgs) is = 3.3V(uC) - 3.3V(pull up supply) = 0V - no conduction, no current flow through FET, 5V signal is allowed to float to 5V by pull up R2.
I hope I made it clearer?