I had exactly this problem. In my experience, the documentation over-simplified things to the extreme. Why are hooks not normal function calls? Where do they get their state? Why are they not functionally pure? "Functional purity" has been muddied too. It used to mean a function whose output depends only on its parameter values. But hooks are not pure, and thus components that depend on them are not either. But react still uses this language.

None of the official docs helped, but I found myself required to use it for work. And I faced confusing behavior I could not explain with the documentation. So I went on a deep-dive for a month or so. I didn't learn everything about react, but I got an intuition for how hooks work. That's not to say I like them. I'll use them now only if I have to, but at least I can. To my mind, hooks present a surface that's difficult to make sense of and hard to use.

Think of how context and useContext probably works.

Every fiber has a parent. I suppose the behavior, although possibly not the implementation, is that the ancestry chain is walked up until the nearest context provider is found. That will be the fiber associated with rendering context that provided the context.