In a situation where it's reasonably obvious who the top two finishers'll be, it works out much like (non-compulsory) IRV (unlike the Australian version, then). In a situation where that's not the case, expect the result to get down right screwy.
Sort of like Queensland and New South Wales state versions, then? Where it's optional preferential - in other words, you can number as many squares as you like?
We don't just take the two top finishers - we exclude the bottom finisher one by one until it's just the two remaining.