To understand the flow of the code, you need to look at the do..while loop :

do { // replace all matching substrings
            System.out.println(org);
            i = org.indexOf(search);
            if (i != -1) {
                result = org.substring(0, i);
                result = result + sub;
                result = result + org.substring(i + search.length());
                org = result;
            }
        } while (i != -1);

Given the description of each line of code:

1. First it print org.
2. indexof() searches for the first occurrence of a character or sub-string. Here it is "is" & store it in i.
3. Then it check the whether i is not equal to -1.
4. Then it extract the sub string from index 0 to the i & store it in result.Here extracted substring is "Th".
5. Then it adds it to sub. Now 'result' stores "Thwas"
6. Last substring() function extract the string- "is a test. This is, too" and after adding it to previous stored value of 'result', it store it into "result".
7. Copy the result string to org.

This loop runs until there exist a sub-string "is".If no such character occurs in this string, then -1 is returned.