Among others. The key functionality is provided by numbervars/4 using the option singletons(true). That assigns normal variables '$VAR'(N), where N is a positive integer and singletons '$VAR'('_'). From there on the numbervars(true) option of write_term/2 prints the variables as A, B or _.
Although write_canonical/1 using the same algorithm, it doesn’t actually use numbervars/4 as it is required to print '$VAR'(N) terms as-is.