The WDC NanoLounge

If you mean here on WDC it knows because you tell it. Click on the number then type in the new number and hit update. Im not sure if it will update based upon the item you are putting your words in or not. However if you post it to an item here on WDC you and others can look at the expanded info link at the top of the item and see how many words you have written. Thus verifying the amount you say you wrote.

On the Nano website you copy and paste yoru story into the word counter and it will update for you.

Remember guys there is nothing but your own integreity that prevents you from just writing the same ten words 5000 times. Nano has and always been about self governed honestly because the only person you are cheating by cheating is yourself.