Construct 2 has a real event stack, meaning triggers can fire, a whole bunch of events can run in the trigger, and then it returns to where it left off. This isn't specific to 'On created', it happens with any trigger, and there are several kinds of triggers that can run during other actions/events (notably the Function object).
It's best not to think about it as "jumping up and down the event sheet", that's not quite accurate. It's more like this:
---- Create an object
------- Trigger 'On created'
---------- 'On created' conditions, actions and subevents run
---- Next action in the loop after 'Create an object'
So it's more like temporarily nesting the trigger events beneath the action, then carrying on the action list.