That text describes the following (Python) pseudocode:
subs = a list of string pairs
As = a list of integers
Bs = a list of integers
def f(state, pc):
if pc == N: return (state, pc)
if state.find(subs[pc][0]) != -1:
return (state.replace(subs[pc][0],subs[pc][1],1), Bs[pc])
else:
return (state,As[pc])
The function f is presumably going to be applied repeatedly.
The last three bullet points is all you really need once you understand the notations. All that comes before is a bit analogous to explaining how Python works before giving the Python code.
