The inch is effectively removed (taken away) between the bottom of the spring perch, and where the knuckle attaches to the strut. Well, more closer to the truth, you can think about it like mounting the bolt ear tabs for the knuckle one inch higher on the strut body. That will move the knuckle and wheel up and inch, yet keep the same height spring.
Following me?
Maybe I need to hit up MS Paint tomorrow and put this particular one to bed. It had me confused for a long time too.
Edit: Nevermind. The traditional CSK's do not lower the car any if you keep the spring the same.