On a small LAN all packets are generally broadcast to everyone. By broadcast I mean that the data is physically sent to everyone. When received the network interface determines if the packet was sent to you by looking at the address.
Using Wireshark your network interface can be set into promiscuous mode which means that all packets are captured and sent from the network interface to the CPU. This allows programs like Wireshark to record all those packets and not just the ones addressed for your computer.
Edit: However the packets don't have to be sent to all computers. A hub can be used to connect multiple computers together and acts as just a repeater meaning all packets are always sent everywhere (except on the wire where the packet came from). A switch however is similar but smarter.
If three computers A, B and C are connected to a switch and A sends a packet to B then the packet will first arrive at the switch. If the switch knows what wire B is connected to then it will only send it down that wire. If it doesn't know it sends it everywhere and later if B replies to A the switch will figure out what wire B is on. This means that C will generally never get to see any of the messages sent between A and B once the switch knows what wires A and B are on.