Emacs

As elisp is a dynamic language, it looks up these functions when needed. You can try it: E.g., evaluate this in the scratch buffer (C-x C-e):

(defun testfn1 ()
  (testfn2 "Test123"))

This works even though testfn2 is not defined. However, evaluating (testfn1) (actually calling the function) will give you an error as testfn2 is not found.

When you define testfn2, it is added to the global scope and thus becomes available for testfn1.

(defun testfn2 (text)
  (message "Msg: %s" text))

Now, (testfn1) works.

You can even define a new version of testfn2 which does something different. This way you can change any function in a lisp environment (this generally applies for scripting languages). This way also circular references are no problem. There may be warnings, when byte compiling functions with undefined references, but these are just warnings and compiling still works. If you look at a byte-compiled elisp file, you still see symbolic references to the called functions.