I tried to locate some Youtube videos that quickly demonstrate what a 5250 terminal screen looks like. This one is pretty good:
5250 is a block mode display system. The server sends out a blob of data to the terminal, which then by itself formats text in color in a pretty way at 80 columns by 25 lines.
The server also tells the terminal to create areas where the user can type things, typically displayed as an underlined area, and/or a list of function keys the user can press to send commands back to the server.
The user's terminal is pretty smart by itself, and handles all cursor movement and text entry without constant per-character hand-holding from the server as with a normal unix terminal session.
When you send data back to the server, it only sends back what is inside the editable areas.
The terminal protocol is designed to be as efficient as possible so that the server is freed up for actual work, so common commands are assigned to single-press function keys, and the function numbering goes up to F24, so there can be a huge number of them available at any time.
You can insert and delete characters in the editable text fields but you can't go over the limit of the field length. Because the display of data is so tightly locked down to the 80x25 display area, it is common for commands and names of things to be "smushed" into some very short abbreviation to fit in the limited space available in each column of data.
EDIT: An interesting side effect of 5250 and 3270 block mode terminal protocols is that they have a very similar modern equivalent... web pages with data entry fields.
It is possible to run a web server on an AS/400 that reformats 5250 / 3270 block mode directly into a web page, and reassigns function keys to clickable buttons on the page. With this, terminal hardware or a terminal program is no longer needed, but instead only a web browser.