The tip of the bit is the first to engage with the wood. A gimlet point will hold the bit on course and stop it from wandering around before the spurs start to cut out the circumference of the hole.
A guide screw will do the same job, but will also start to pull the bit through the workpiece thanks to its thread. This reduces the need for the user to apply downward pressure when drilling.
The spurs then cut around the outside of the hole to ensure its sides are smooth, as well as helping to guide the bit through the workpiece.
As the bit turns, the lips cut into the wood, forcing waste material to travel up the spiral flighting of the bit.