but I want an explanation as to how it works.
Let's desect it piece by piece.
function() { .... } is a syntax for anonymous function.
function() { .... }() is defining and calling the anonymous function on the same line.
The return value of the function in your sample is an object defined using JSON notation (Javscript Object Notation)
{ setup : .... } is an object with one attribute: it's called setup, and it happens to be a function, in your case.
so, mystuff got the return value, which is an object with a property (function) called setup, and mystuff.setup() invokes this setup function.
Now, the interesting part is probably how setup just calls the blah function, defined inside that enclosing anonymous function.
I believe the technical term here is closure (see the section forming closures) (Also see the wikipedia definition)
Essentially the function becomes like a module of its own, with variables bound to it.
It's explained in crescentfresh's answer