She's been playing a game called Teach Your Monster to Read for a few months that slowly introduces sounds and letter combinations.
Recently she's graduated to being able to read a page or two at a time of Hop on Pop.
"You're reading!" I told her.
"No dad, I'm not reading, I'm just memorizing what the words look like."
"... But that's kind of all reading is."
The base case is you can sound out new combinations of letters.
But after you've seen them a number of times you just absorb them all at once from memory.
You chunk more and more up to words.
It's all an inductive system of familiarity powered by System 2, just falling back to System 1 for totally novel input.
You get combinatorial more speed of comprehension as you have a larger catalog of phonemes and words memorized.