Your result will vary depending on what kind of terminal or console program you're on, but yes, on most \b is a nondestructive backspace. It moves the cursor backward, but doesn't erase what's there.

So for the hello worl part, the code outputs

hello worl
          ^

...(where ^ shows where the cursor is) Then it outputs two \b characters which moves the cursor backward two places without erasing (on your terminal):

hello worl
        ^

Note the cursor is now on the r. Then it outputs d, which overwrites the r and gives us:

hello wodl
         ^

Finally, it outputs \n, which is a non-destructive newline (again, on most terminals, including apparently yours), so the l is left unchanged and the cursor is moved to the beginning of the next line.