They (and most mass-produced manufacturers) use blocks glued together. I'm not sure about the glue they use, but you can do it with regular old titebond. The advantages to using pegs/dovetail/locking mechanism (biscuits, dowels etc) is the same for any woodworking. It can strengthen the joints and hold things more true, depending on how well-aged the wood is. The 'downside' is that it's more costly, mostly in production time, as well as the fact that the nature of a fender-style solid-body electric instrument not subject to a lot of pressure/force in areas that would cause the body to split or crack on the seams.
