Compose example in Paul Graham's ANSI Common Lisp

Question

Can anybody explain an example in Paul Graham's ANSI Common Lisp page 110?

The example try to explain the use &rest and lambda to create functional programming facilities. One of them is a function to compose functional arguments. I cannot find anything explaining how it worked. The code is as follows:

(defun compose (&rest fns)
  (destructuring-bind (fn1 . rest) (reverse fns)
    #'(lambda (&rest args)
        (reduce #'(lambda (v f) (funcall f v))
                rest
                :initial-value (apply fn1 args)))))

The usage is:

(mapcar (compose #'list #'round #'sqrt)
        '(4 9 16 25))

The output is:

((2) (3) (4) (5))

Line 2 and 6 look especially like magic to me. Any comments will be appreciated.