DD has a value in the bitstream called dialnorm, which lets the decoder know where the level of 'normal' dialog in the bitstream is. The intent is that the dialog will always be the same level for a given volume knob position, although that is subject to the engineers doing the right thing.
Night mode takes sounds louder or quieter than dialnorm and makes them closer to dialnorm, or the dialog. The intended net effect is to reduce the dynamic range while allowing the dialog volume to stay constant. It's a pretty nifty idea in theory and seems to work OK in practice as well.
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Charlie