That read method just retrieves bytes that have already been received from an internal buffer.

The buffer is pre-allocated to a specific size (64 bytes) and that is how many bytes can be received before you start to lose data as it gets overwritten. You have to be sure to read your data from the buffer before it overflows.

The function that actually receives each UART bit from the IO port, builds them into bytes, and stores them in the internal buffer, is this one:

void SoftwareSerial::recv()
{

#if GCC_VERSION < 40302
// Work-around for avr-gcc 4.3.0 OSX version bug
// Preserve the registers that the compiler misses
// (courtesy of Arduino forum user *etracer*)
  asm volatile(
    "push r18 \n\t"
    "push r19 \n\t"
    "push r20 \n\t"
    "push r21 \n\t"
    "push r22 \n\t"
    "push r23 \n\t"
    "push r26 \n\t"
    "push r27 \n\t"
    ::);
#endif

  uint8_t d = 0;

  // If RX line is high, then we don't see any start bit
  // so interrupt is probably not for us
  if (_inverse_logic ? rx_pin_read() : !rx_pin_read())
  {
    // Wait approximately 1/2 of a bit width to "center" the sample
    tunedDelay(_rx_delay_centering);
    DebugPulse(_DEBUG_PIN2, 1);

    // Read each of the 8 bits
    for (uint8_t i=0x1; i; i <<= 1)
    {
      tunedDelay(_rx_delay_intrabit);
      DebugPulse(_DEBUG_PIN2, 1);
      uint8_t noti = ~i;
      if (rx_pin_read())
        d |= i;
      else // else clause added to ensure function timing is ~balanced
        d &= noti;
    }

    // skip the stop bit
    tunedDelay(_rx_delay_stopbit);
    DebugPulse(_DEBUG_PIN2, 1);

    if (_inverse_logic)
      d = ~d;
      
    // if buffer full, set the overflow flag and return
    if ((_receive_buffer_tail + 1) % _SS_MAX_RX_BUFF != _receive_buffer_head)
    {
      // save new data in buffer: tail points to where byte goes
      _receive_buffer[_receive_buffer_tail] = d; // save new byte
      _receive_buffer_tail = (_receive_buffer_tail + 1) % _SS_MAX_RX_BUFF;
    }
    else
    {
#if _DEBUG // for scope: pulse pin as overflow indictator
      DebugPulse(_DEBUG_PIN1, 1);
#endif
      _buffer_overflow = true;
    } 
  } 

#if GCC_VERSION < 40302
// Work-around for avr-gcc 4.3.0 OSX version bug
// Restore the registers that the compiler misses
  asm volatile(
    "pop r27 \n\t"
    "pop r26 \n\t"
    "pop r23 \n\t"
    "pop r22 \n\t"
    "pop r21 \n\t"
    "pop r20 \n\t"
    "pop r19 \n\t"
    "pop r18 \n\t"
    ::);
#endif
}