Clarification of FAQ: Pi-Hole with dnsmasq on router

I'm unclear on what is probably a simple, but unstated, point in the How do I configure my devices to use Pi-hole as their DNS server? FAQ entry.

Method 2 in this FAQ is "Advertise Pi-hole’s IP address via dnsmasq in the router", and the instructions are basically to (on the router) set up a custom dnsmasq entry to point to the Pi-Hole IP, and (on the Pi-Hole) to adjust the upstream DNS provider to point only to the IP of the router.

In this setup, what is actually providing the DNS service? I assume that you have to have the router providing DNS service, but the FAQ doesn't say this anywhere, and when I tried to do this on my system, it didn't work (surely because of something I'm doing wrong). (I also wasn't sure if I should be setting the general system DNS, or the DNS under the DHCP server.)

Could someone clarify how this setup is supposed to work? (And perhaps the FAQ could be updated as well.) Thank you!

The router's DHCP server advertises the Pi-hole's IP (this seems to be stated in the title of the point). Then the Pi-hole uses the router as the upstream. Therefore, a client will go to Pi-hole, Pi-hole will go to the router, and the router will go to its upstream.

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