How does Phone Link know my iPhone's battery level?

It is normal Bluetooth data, rather than Phone Link estimating the charge level. Bluetooth Low Energy defines a standard Battery Service, and accessories can expose a percentage through a GATT characteristic. iOS decides what it exposes to a paired device and when; Phone Link reads the value that is available through the approved iPhone pairing path and then displays it.

That is also why the number may be delayed, unavailable after a reconnect, or update less often than the percentage shown on the iPhone itself. It is not a continuous read of the phone's power system, and it does not give the PC access to battery-health details, charging history, or other private device information. For a normal paired iPhone, though, seeing its battery percentage in Phone Link is expected behavior.