Where and how is an exception passed if it is declared with the throws keyword in the method signature?

In Java, the keyword throws in a method declaration indicates that the method may generate a certain checked exception. This does not mean that the exception is created or handled immediately, but rather informs the calling code of the need to handle or propagate this exception further.

The exception is actually created and thrown inside the method body using the throw statement. For example:

public void readFile(String path) throws IOException {
    if (fileNotFound) {
        throw new IOException("File not found"); // here the exception is created and thrown
    }
    // ...
}

Thus, throws in the method declaration passes the responsibility for handling the exception to the calling code, and the exception itself is passed through the throw mechanism inside the method.