Sun does a great service in providing source code for most of the base
Java classes, which means you can look directly into the code to see what's going in. In this specific case, the source for "java.util.LinkedList" includes the following, and I hope I'm not violating some license agreement by posting this here ;-)
The class
ListIter is in nested (inner) class that implements all of the behavior of a "ListIterator". It is private so you can't willy-nilly create one, but when you call the "listIterator(index)" method a "ListIter" is instantiated and returned to you. Since its methods are public you can call them.
Ernest has explained the advantages of doing it this way. It's a nice model to understand.