At first, when the voltage under or below the maximum limit ( at which it adjusted) the maximum voltage dropped through the VR to the ground and the Base of Transistor does not get enough power to switch on the transistor. At this stage, the transistor in OFF state and Relay not get supply and it is not activated.
when the Input voltage of this circuit is increasing and cross a level than the input voltage through resistor R1 and preset also increased enough amount of voltage is at the Base of Transistor Turned On it and Supply passed Between Emitter and collector. Now Relay is activated and supply is Disconnected to the appliance . And that is protected from high voltage supply.
Before using it should be adjusted by preset and tested the input voltage and set required the auto cut level according to suitable.