Essentially there are two keys used to encrypt data on an iphone - one linked to the hardware (hardcoded and unique to each iphone, cannot be erased) and one linked to the software that's stored in NAND. After N attempts the NAND is erased and the key is lost thus all the data on the device is gone (one could try to brute force using a rainbow table style attack but at this point it's a lost cause because the amount of time it would take to decrypt the device). The NSA uses the old technique of copying this NAND to a backup and restoring it every time the device gets erased. This would give them infinite attempts at cracking the passcode with as little device meddling as possible

edit Apologies forgot to mention the passcode/fingerprint is tied into the 2 key process.