Recursion tends to be a much easier approach to parsing than iteration. An informal pseudo-code grammar might be:

word character: any character matching /[A-Za-z]/

sequence: starts with '\', then one or more word characters

section: one or more sequences, or something that starts with '{', 
    then a section, then '}'
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Note the "then a section" part of 'section' is recursive. This allows sections to be embedded inside other sections. The above is quite a bit wordier than a formal grammar defintion would be (as pseduo-code often is), but should be more understandable if you haven't played with context-free grammars before.