The underlying protocol is called "fast path interface". It's similar to RPC(Remote Procedure Call). Client sends "Function call" packet along with target function OID(Object Id). The called function within backend is executed and the result is returned back through "Function call response".
The functions called in large object interface are:
Problem is, lo_lseek and lo_tell as I said earlier. First, their offset parameter is defined 4 bytes long. Second their result length is defined as 4 byte long. So we can handle only up 2^31-1 = 2GB. What shall we do? Well, we will add new function in backend namely, lo_lseek64 and lo_tell64. Libpq will check if those 64-bit functions exist. If yes, then use them. Otherwise (that means backend is likely pre-9.3 version) we use plain old 32-bit limited lo_lseek and lo_tell. This way, we do not break backward compatibility. Of course you need to use 9.3 libpq to enjoy "larger large objects".
I hope I'm going to post the first cut of patch by in September.