Okay nobody really answered this question clearly for some reason, so...
It's pretty simple really. Imagine your camera's sensor as a rectangle, and project that shape outward through the lens and into the world, as a 4 sided rectangular pyramid. A tulip hood is simply a regular cylindrical hood with that pyramid shape cut out of it.
Thus, it does not block any of the light headed directly for the sensor, but it does block some of the light that would have just missed the rectangle of the sensor anyway (and ended up bouncing around and lowering contrast)
You only see them on very wide lenses, because those are the only ones where light from such extremely shallow angles is actually going to hit the sensor to make this cutaway necessary at such short distances from the lens.
Note: a tulip hood only makes sense for one specific type of sensor. If you have a lens that was designed for full frame, for instance, and you are using a crop sensor, then the hood that comes with it wont have as much coverage as it could, and you will probably get suboptimal contrast. If its the other way around, then the hood will be too aggressive, and you will get really really weird rectangular vignetting.