What is implicit in the question whether a chess engine understands chess is that (some) humans undertstand it. To answer the question you do no so much need to ask what “understand” means but what is meant by “humans understand chess”. If you set out what is involved in humans understanding chess you can then consider how computers compare to humans.
Does a chess engine "understand" chess?

So you basically took what I wrote, and just rewrote it.
As far as "understanding 1's and 0's", I think the average person understands I meant in a mechanical sense of turning silicon gates off and on. -No I don't know the physics behind it, but a gate's "on" or "off" position doesn't mean it's a mechanical gate swinging inside your CPU. Perhaps someone on chess.com designs CPU's for a living and can elaborate on the topic.
I actually read a book in the 80's, a true story, but if I recall, some details were changed in order to conceal the identities of the companies the guy worked at.
It was about the creation of a new CPU, set in the very late 70's, possibly very early 80's. The story was about micro programmers and the not just any cpu, but a knockoff of another companies CPU. It wasn't AMD vs Intel, because that started later. In the beginning intel and AMD were basically friends, and Intel was using AMD as a backup for personal computers, but eventually that soured because Intel got tired of giving AMD it's proprietary knowledge.
Getting back to the book, it was for a micro processor for a mini frame computer. Quite engaging read at the time. It talked not only about micro processors in a way that the average reader could understand, but it was an eye opening story about how this whole process played out. They would get the top programmers out of college, and had to make sure they had zero contact with the company they were trying to make a clone CPU from. Then they would put these programming, who worked 80 to 90's a week into essentially a black box type environment. Not a literally environment, but the rules they had to follow in order to not only keep working on the project, but to make sure they did nothing that would cause them to somehow get details from the other company.
Probably the most interesting part, and it was mostly a story about humans and not so much about how to design a cpu, was the total burnout of the programmers. It was a massive revolving door of programmers. They'd burn out after a year and either they had to get promoted, or they'd leave the company and get some sort of higher level job, like being a manager or higher paid job at some other technology company, and definitively not taking a job writing code, because the majority of the programmers started to hate writing code after 12 to 18 months, but most left or got after about 12. In any event, it was a desperate attempt to cash in on some micro processor before both were basically obsolete.
No not really, but I've made the distinction and either it will take or it won't .
Anyway, the burnout of developers continues to this day, you can read a bunch of articles about how the biggest video games companies are using up developers whose life ambition is to work on video games and spitting them out completely burned out having never reached a high salary and never escaping "heads-down" coding. This is not much different than other industries, though...the "free market" squeezes the last dollar out for corporate profit margins by forcing people to work on ever narrower and more tedious specialties until they just can't stand it any more. This is one reason the average person now changes careers 3 times in their life.
Computers only understand strings of 1's and 0's. Everything else is an interpretation of data they obtain.
Artificial Intelligence is just a phrase. A made up phrase that programmers and the public understands, but it's really just a phrase for a computer doing something "human like" (Or animal like, for pet robots).
But in the end, they're just programs and machines with software to interpret new data they can get by sensors or human input or what ever else constitutes data they can process.
Don't get me wrong, Alpha Chess Zero and Leela Chess Zero are both phenomenal programs that were made in order to be able to take the basic rules of chess, and selectively remember what constitutes good move or bad moves, with a healthy amount of coding dedicated to processing positional considerations and to be able to apply long term consequences for moves.
On the flip side, no human plays millions of games to become a super GM or the World Chess Champion, so it's more of an exercise in how to distill millions of self played engine games into a data set that is usable for future games.
Still, that is the trend for future chess engine. Will be interesting if at some point in the future all the top engines will be based on that type of programming. In any event, for the near future, single PC adaptive learning chess engines will almost certainly have to start with some sort of base knowledge of decent chess, or else people would have to dedicate their machine to weeks of learning chess from scratch.
Artificial intelligence refers to software/hardware actually modifying it's own parameters and code based on its "environment". Chess engines that use machine learning are not truly "Artificial Intelligence" by the definition of Strong AI, but they do "learn" and adapt their play without requiring new programming, on their own.
Saying that artificial intelligence is equivalent to 'a computer doing something "human like"' is like saying a robotic zombie arm used as a prop on Walking Dead is an example of AI.
Also, computers don't actually "understand" strings of 1s and 0s any more or less than they understand any data they interpret. Does a 6502 chip "understand" what is happening when you load a byte value into a register or the accumulator and process the next instruction? Not by any human standard. Machine learning engines do "understand" chess though...in the sense that they understand their environment (the rules of chess including all limitations and win/lose/draw conditions), can play chess, can evaluate their success, and play chess better next time without any further coding or loading of external data or valuations.
So, you can decide that computers do or do not understand chess in this context by the definition of "understand" you choose, but if the computer does understand 1s and 0s, then it also "understands" any higher level functions built on the base processors's set of instructions by extension. If you think computers *don't* understand chess...then they also don't understand 1s and 0s.
So you basically took what I wrote, and just rewrote it.
As far as "understanding 1's and 0's", I think the average person understands I meant in a mechanical sense of turning silicon gates off and on. -No I don't know the physics behind it, but a gate's "on" or "off" position doesn't mean it's a mechanical gate swinging inside your CPU. Perhaps someone on chess.com designs CPU's for a living and can elaborate on the topic.
I actually read a book in the 80's, a true story, but if I recall, some details were changed in order to conceal the identities of the companies the guy worked at.
It was about the creation of a new CPU, set in the very late 70's, possibly very early 80's. The story was about micro programmers and the not just any cpu, but a knockoff of another companies CPU. It wasn't AMD vs Intel, because that started later. In the beginning intel and AMD were basically friends, and Intel was using AMD as a backup for personal computers, but eventually that soured because Intel got tired of giving AMD it's proprietary knowledge.
Getting back to the book, it was for a micro processor for a mini frame computer. Quite engaging read at the time. It talked not only about micro processors in a way that the average reader could understand, but it was an eye opening story about how this whole process played out. They would get the top programmers out of college, and had to make sure they had zero contact with the company they were trying to make a clone CPU from. Then they would put these programming, who worked 80 to 90's a week into essentially a black box type environment. Not a literally environment, but the rules they had to follow in order to not only keep working on the project, but to make sure they did nothing that would cause them to somehow get details from the other company.
Probably the most interesting part, and it was mostly a story about humans and not so much about how to design a cpu, was the total burnout of the programmers. It was a massive revolving door of programmers. They'd burn out after a year and either they had to get promoted, or they'd leave the company and get some sort of higher level job, like being a manager or higher paid job at some other technology company, and definitively not taking a job writing code, because the majority of the programmers started to hate writing code after 12 to 18 months, but most left or got after about 12. In any event, it was a desperate attempt to cash in on some micro processor before both were basically obsolete.