The system is pretty simple; as the community gives more gifts out to other players, higher donation tiers are unlocked and a bigger donation will go to charity. You can track the progress on the official site, or you can just get in and start gifting. So everyone’s giving things to other people and money goes to charity; it’s a pretty win-win scenario in the game and in the real world.
Source: Official Site, Gift Tracker; thanks to Chris and ThatLanteshGuy for the tip!