If you look in Hammer and choose a model you can view the smaller versions of that model all broken up. Each broken piece is a seperate model I believe and so when you make a custom model you must make the full version and the broken version and somehow write the information in the model files which I think are .QC and uhm..I forgot.
Gibs are models too because in Smod the enemies explode on high pressure and then these bloody gib models fly everywhere and the room is filled with blood and GORE!