The $_[0] is the socket that is passed from the accept into the sub. The filename is looked up and if it is executable, a pipe is created with it, otherwise it is opened directly. In either case the contents of the resulting IO::All object are fed into the $_[0] socket. Very similar to the simplistic use of '<' in:
$contents < io 'file.txt';
So this oneline web server can send the contents of simple files, or the generated output from executables.
Update: The reason you couldn't find anything in perldoc is because this is an operator that has been overridden to act in this way by IO::All which is where the simple example above comes from. Thus, you can only use the '<' operator this way with IO:All objects.