swing - KeyAdapter inner class... What exactly is Java doing here?

Whenever I need to grab input from the keyboard, I use the following KeyAdapter inner class technique.

controls = new KeyAdapter()

   {
       public void keyPressed(KeyEvent e)
          {
              //do something with input
          }
   };

It wasn't recently that I learned how to do this, but I am beginning to become uncomfortable, as I like to understand what is happening in my code. What exactly is Java doing here? The best I can come up with is it is a form of inner class, but why can't I write a constructor?