Alert thresholds and policies work by monitoring metrics and comparing them to set threshold values. When a metric value goes above the threshold, an alert is triggered. This alert then activates a policy that decides what action to take, such as notifying a team or running an automated response. The example code checks if a metric value is greater than a threshold and sets an alert flag accordingly. The execution table shows the step-by-step check and alert setting. Key points include that alerts only trigger when the metric strictly exceeds the threshold, not when equal. Changing the threshold affects whether alerts trigger. Understanding this flow helps manage monitoring and response effectively.