If you ask how this is done, I'm not sure how it is executed exactly. I know that you can create ssms plugins in visual studio, and I'm sure there is a way to take a filestream object and decode it.
If you are looking for a way to do this, besides the plugin you mentioned, there is a great free plugin that I use. You can find the ssmsboost plugin at http://www.ssmsboost.com . This plugin has a community version and a pro version. The only difference between them is that you need to update the community version every 120 days. This plugin has many nice features, but the one you ask for is
Results of the SSMS mesh analyzer:
The function allows you to export and view files or some large amounts of text or XML data from tables (for example, files from the sharepoint services document store). The necessary data should simply be displayed in the ResultsGrid. By right-clicking the cell with the desired value and selecting "Visualize As-> ..", you can specify to save the data to a file with a predefined name and open it using a user or standard application. Regardless of the fact that SSMS truncates long data from VARBINARY / VARCHAR fields when outputting it to ResultsGrid: SSMSBoost works with SSMS internal memory and retrieves the full cell value. Below you can see how the image from the [LargePhoto] field in [Production] is displayed. [ProductPhoto] from the [AdventureWorks] database:

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