this is simple :) when no action is defined it is calling the same url again with the specified method, so in this example it sends a POST-Request to the level-page, which evaluates the posted data on the server (in PHP f.e.)
If you look up information on the form tag and specifically the relevant attributes, proper resources should mention the default values. That said, I just tried this and didn’t find it immediately. If in doubt, check the specification; it should always be in there.
I guess it is a good example of how to do thorough research. Just superficially looking up info might not give you all that you need. ;)
The values in the level 2 page have no real meaning other than allowing you to find the solution. It is the script on the server (which you cannot see) that has these same values stored somewhere to compare your submission with.
B.t.w., please remove the spoilers from your post (two challenges spoiled!). :)