it's an anti androgen that supposedly can convert testosterone to estrogen and block the testosterone from binding to the androgen receptors.
drugs like avodart and propecia block the conversion of testosterone to the more potent and nasty dihydrotestosterone, which is much worse for hair. i think i remember reading that DHT has a much bigger affinity for the androgen receptor and that it is 30 times more potent.
spironolactone can take care of the testosterone that wasn't converted to DHT.