He trusts his athleticism to get him close enough to bother the shot and close down angles and trusts his gk to take care of closing the other angle. It's defence by playing the odds, which on the whole is pretty smart. Occasionally the striker will hit it perfect and score a worldie - like Lautaro Martinez at Anfield - but the majority of the time it works, and is mucj less riskier than committing to a challenge. Especially so when he has Alisson behind him.
He's genuinely one of the best 1vs1 defenders ever, on the ball at least
As you say, it's playing by percentages and it's very effective. I play 5/7 aside a lot and I'm not particularly nimble or strong but I always show players on the outside to the point I will 'give' them a yard of space. Then as I know they can only do one of several things (go outside, take an extra touch or shoot etc) I will go across and close the space/block and not allow them to do anything comfortable. You'd have to have Messi/Mbappe level of first touch and acceleration to really do anything 'good' with that space. Not that I'm comparing myself to VVD or anything..
Anyways, yes he's great at those 1 vs 1 situations but his lack of closing down and getting tight is quite poor. He 'gets away' with it because Liverpool don't get attacked a lot and him slowing a player means, it allows his team mates to counter press/close the space, so it doesn't get punished as much. As I mentioned though, his shot blocking in the penalty box today was Lindelof-esque; really passive and non-committal.
To be fair, I think his ACL injury has taken away some of his ridiculous athleticism where maybe nowadays, he isn't as interested in duelling as much physically or throwing himself about (for last second interceptions/blocks etc). Reminds of Rio's later years where he became more mature and stepped in after reading the situation.