The peg is very simple: If you have SBD, you can "settle" (or "convert") them into STEEM at a fair price after one week.
The "fair" price is taken from internal and external exchanges and trading and the 1 week (averaged) window is to ensure that you can't easily manipulate the price feed.
So .. after one week, you can exchange every single SBD you hold into the corresponding amount of STEEM .. independent of what the internal or external markets actually look like.
I personally prefer trading in the DEX, but if you need to exchange a large amount of SBD and don't want to move the markets .. then you should use the convert feature.