The SQ-1 working as a clock divider. Korg sync uses short 5v pulses to generate its clock signal. The LittleBits out on the SQ-1 provides a mixed CV/Gate output variable between 0 and 5 volts. This can be used to output a sync pulse for every SQ-1 step (as long as Gate is on for that step), by setting the step pot to maximum (5v) and Duty to a short amount (around 10 o'clock), to simulate a clock pulse.
By turning off Gate on all the steps but the first one, a pulse will be generated at the beginning of the first step, while the following steps will output 0v. The number of steps enabled via Active Step will determine the clock division. In this case, all steps are enabled, so it will count all the way up to 16 before generating the next clock pulse, thereby effectively dividing the clock rate by 16, Q.E.D.
The Volca Keys is set to 1 step per clock pulse (Global #8 on latest firmware), so each clock pulse will increment one step on the sequencer. Flux mode allows a resolution of up to 128 steps for each pattern, which means 8 virtual steps for each actual sequencer step. With the proper clock division, each incoming clock pulse can be used to start an 8-step sequence, synchronized to a slower, more suitable clock. In this example we get one pulse per measure, so each sequencer step plays one measure of 1/8 notes.
Besides doing the clock division, the SQ-1 is also the sync master, with the Volca Sample and the JX-03 being slaved to it via MIDI clock.
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