Matt,
I wouldn't really call this VI a state machine. For a good example of a state machine, you can create one from a template by going to New... >> VI >> Frameworks >> Design Patterns >> Standard State Machine, or you can use the State Diagram Toolkit to create one.
To answer your question about the elapsed time VI. If the input for the start time is 0 and the time is reset, it gets the current time as the start time, otherwise, it is the offset, in seconds, from January 1, 1904 12:00 AM. This is all documented in the help for the elapsed time VI if you open the detailed help in the context help window.
Brian Coalson
Software Engineer
National Instruments