The biggest problem kids have winding down is being able to focus. Think about yourself; as you get tired, you lose some of your ability to focus, right? If you work long hours, the more hours you work the less you can focus on your tasks and the more distracted you get.
Kids work the same way, but to a much higher degree because they have less skill at intentionally focusing their attention. A kid that's a little tired will still be able to focus on going to sleep; a kid that's very tired will become more distracted, will see more things to play with and want to play with all of them. They'll lose their self control, which is something kids have to work very hard to develop.
They're not so tired that they fall asleep directly due to tiredness, as at least for my kids they will do that if they get very tired. They're in that middle zone, like when I'm up at 11pm after putting them to bed and know I should go to bed but instead grab a PB&J and watch Big Bang Theory reruns for an hour. That's basically what they're doing, just the toddler version.