Andrew - You basically have it right. Imagine a stick tang knife with slots cut into the edge of the handle. Insert whatever you want into these slots. In this knife, Ray used some mild steel to fill in the slots, so it looks like a full tang. If you want to get fancy, you can use more expensive materials, like damascus, mokume, pearl, etc. You are only limited by your imagination (or your wallet).
I have one from Ray that has paper micarta scales with what looks like a linen micarta frame (Ray can correct me if I'm wrong).