In an ordinary TRS-80, only three video line addressing bits (L1, L2, and L4) are sent to the character generator, and therefore only 8 lines can be generated per character. The fourth signal, L8, is instead sent as an input (Z26.12, after a delay through Z27) to the AND gate controlling the enable of the character-pixels shift register (Z10). This is what prevents the top four lines of the character being repeated in the bottom four lines of the 12-line character cell (and instead causes those four lines to be blank).
When the Gendon mod is done, L8 is removed from the shift-register's enable AND gate, and is instead sent to the EPROM to be used as a fourth video line address bit (A3 of the EPROM, pin 5). That allows the EPROM to generate 16 distinct lines per character (and it requires each character in the ROM to be 16 bytes away from neighboring characters), but the line addresses get reset to zero after 12 lines, so only 12 lines of data are ever used.
The other change is that an extra (sixth) bit is output from the EPROM (Q5, pin 15) and sent to the first-out bit on the shift register (Z10.14), which is normally connected to ground (and therefore normally causing the leftmost column of every character to be blank).
Together, those changes increase the ROM-controlled area of the character cell from 5x8 to the full 6x12 dimensions of the cell.