The timezone is dtermined by reading the 'TZ' environment variable.

This variable is set when you execute 'set_parms timezone'. Set_parms
edits the file '/etc/TIMEZONE,' which exports the 'TZ' environment
variable. When you reboot after executing set_parms, the file
/etc/TIMEZONE will be read and your TZ variable set to the value you
specified. The value is in the format:

  [:]STDoffset[DST[offset][,rule]]

For example: PST8PDT for the U.S. Pacific Time Zone

See the environ(5) manpage for a detailed description of the format.

Note, the offset for daylight savings time is supplied by the
'/usr/lib/tztab' configuration file.

libc functions like ctime use the 'TZ' variable to determine the timezone.