Dê uma olhada em man bash
(ou qualquer shell que você esteja usando):
${parameter##word}
Remove matching prefix pattern. The word is expanded to produce
a pattern just as in pathname expansion. If the pattern matches
the beginning of the value of parameter, then the result of the
expansion is the expanded value of parameter with the shortest
matching pattern (the ''#'' case) or the longest matching pat‐
tern (the ''##'' case) deleted. If parameter is @ or *, the
pattern removal operation is applied to each positional parame‐
ter in turn, and the expansion is the resultant list. If param‐
eter is an array variable subscripted with @ or *, the pattern
removal operation is applied to each member of the array in
turn, and the expansion is the resultant list.
Assim, no seu caso, ele remove tudo até o último "." e retorna a string restante, que é a extensão do arquivo.