How Schema Validation works

I'm trying to understand the basic premiss to something like this:

[cut out from schema]
<xsd:element name="LevelCode" type="sd:LevelCodeType" minOccurs="0" />

[cut out from schema]
<xsd:simpleType name="LevelCodeType">
 <xsd:restriction base="xsd:string">
 <xsd:pattern
value="[Ii][Ee][Pp]|[Uu][EeSs]|[Pp][Ss]|[Kk][Gg]|[1-9]|[1][0-2]" />
 </xsd:restriction>
</xsd:simpleType>


Is the xsd:pattern a regular expression?  What causes the validation to
occur?  How can the above be written in plain Enlish?

Thanks,
Karl