RS-In swings to a voltage below ground; this charges C1 to that negative voltage (minus one diode drop), creating a negative power supply.
RS-In, when move than about +1V turns on the inverter, causing a low to be output at Tx.
RS-In, when below about 1V turns off the inverter, allowing R1 to pull Tx high.
Rx, when near Vcc, turns off the other inverter, causing RS-Out to be pulled down to the voltage stored in C1 (see above).
Rx, when near ground, turns on the other inverter, causing RS-Out to be pulled to near Vcc.