I'll try to explain, although it's a lot easier to see if you print it out and cut the bits up yourself so you can what's going on.
Look at the guy in the bottom left hand corner. Call him Jake. Look closely where his head goes. Call this guy Toby.
In the picture's first position, Toby has a longer face, and more visible eyes. In the second part his face is more squat.
In the picture's second state, Jake is missing the top of his head.
Basically, the missing bits of those faces have gone to other bits to make a new face.
Similarly, you can see that one guy loses half his shorts, and someone else loses half their shoes.
It's very good, though.