How do machines learn meaning?

This isn't learning by any means - this is just similarity. Machines don't understand what the words mean, nor the nuance of how to use them via this method.

I'm not ML expert (especially in the natural language space), but I can't help thinking something is missing here. I know a ship 'is-a' boat. Cats and dogs are unrelated animals etc. Maybe the colocated words are a very good approximation of a dictionary or real meaning?