My "personal" way of explaining it when playing with new players (not official at all, but it works) is that you play a volcano tile like any other after placing the dragon on it.
But if you place on that tile a figure that can be eaten by the dragon, then the dragon eats the figure before it can touch the tile (so the figure hasn't even been placed).
This applies also to meeple placed using a portal or flying machine on a tile with the dragon. And the same mechanic works with the plague and Russian promos too