Why cut words up? The model owns a fixed "dictionary" of pieces — like a box of LEGO bricks. It cannot add new bricks.
Blue = common words like "teaches" and "in". They appear so often they earned their own brick.
Orange = rare words like "Academy". No brick for the whole word — so it snaps together from smaller bricks it already has: "Acad" + "emy".
That is the trick: with enough small bricks, the model can read any word ever written — even names and words invented tomorrow.