Assuming it's a normal extension and has to abide by the same rules that Non-Google Authored extensions do, the extension manifest indicates the extension doesn't have access to do any cross domain posts so all the filtering is done client side. Digging a little deeper, it looks like the blocked sites are stored in Chrome's LocalStorage, which if memory serves me correctly is somehow isolated per extension.
It should be relatively easy to listen in on the background page while the extension is running and write a script to extract the list of blocked sites or update it with a master list so you don't have to block dozens or hundreds of sites manually.
Not that I think everyone should blindly block everything everyone else does on HN; I personally loathe Experts Exchange, but I do find an answer I needed from them now and then.
I was more curious than anything.
Update: As "dsl" posted above, it does look like the extension makes a call out to a Google Endpoint to record the block as well, but I don't believe that call actually filters the data for you. That's still done client side. So it's probably best not to call the end point directly or update the blocked sites list directly, but actual use the extension as intended?