How Iterator’s remove method actually remove an object

How exactly Iterator removes elements depends on its implementation, which may be different for different Collections. Definitely it doesn’t break the loop you’re in. I’ve just looked how ArrayList iterator is implemented and here’s the code:

public void remove() {
    if (lastRet < 0)
        throw new IllegalStateException();
    checkForComodification();

    try {
        ArrayList.this.remove(lastRet);
        cursor = lastRet;
        lastRet = -1;
        expectedModCount = modCount;
    } catch (IndexOutOfBoundsException ex) {
        throw new ConcurrentModificationException();
    }
}

So it checks for concurrent modifications, removes element using public ArrayList remove method, and increments counter of list modifications so ConcurrentModificationException won’t be thrown at next iteration.