General :: Xargs - How Some Command Receive Input From Both Sides

I would like to ask the following:
1) ls -l |grep test -> this will grep every "ls -l" output line
2) ls -1 |xargs grep test -> this will grep every single file with test
3) ls -1 |xargs echo -> this will echo directory list
4) ls -1 |echo -> this does nothing!!!

My question is: how some command can receive input from "both sides" (grep can grep whole output or every single file - xargs, the same is for i.e. wc command). 4) echo does nothing (it's a single echo command).