I wasn't around at the time and the only thing I know is from reading Knuth's books/papers/interviews. :-) But I imagine that (1) the typesetting machine wouldn't attach to your microcomputer like a peripheral, and probably came with its own computer or equivalent, (2) there wouldn't be too many bits to process: you'd first load your preferred high-resolution fonts onto it with floppy disks or whatever (the shapes for each letter), then the actual output sent to the device would just be the letters and their (relative) positions (not each bit of the page “image”).