To answer your question, { config, pkgs, ... }: declares a function that takes an attribute set containing values for "config" and "pkgs". The ellipsis indicates that it's okay to pass extra attributes.

Nixos-rebuild calls your function by: with (import <nixpkgs> {}); callPackage ./configuration.nix {}

<nixpkgs> is a file containing the set of all symbols (packages are under pkgs, Nix config lives in config, etc.) like a root namespace. callPackage inherits all those symbols and passes them to the function, which is how they got bound.

0. https://nixos.org/nixos/nix-pills/index.html

1. https://learnxinyminutes.com/docs/nix/

EDIT: I guess it's also like Git where it's really confusing until a moment of enlightenment where it all makes sense.