Rundll command parses the command line, then loads the DLL file using the LoadLibrary() function. The LoadLibrary() loads a module into the address space of the calling process. Read more about this function on Microsoft's website: http://msdn.microsoft.com/en-us/library/windows/desktop/ms684175(v=vs.85).aspx . After this step is complete, Rundll will obtain the address of the <entrypoint> using the GetProcAddress() function (retrieves the address of an exported function or variable from the specified dynamic-link library (DLL) http://msdn.microsoft.com/en-us/library/windows/desktop/ms683212(v=vs.85).aspx), then it will call the <entrypoint> function by analyzing the <optional arguments>. In the end, Rundll32 will unload the DLL file.
If your Rundll32 is not found when you open Control Pannel you'll have to do the following: Insert your Windows CD, open command prompt as an administrator, type expand Z:\i386\rundll32.ex_ c:\windows\system32\rundll32.exe (Z is your CD ROM drive letter) then restart your computer.
The usual path of the Runndll command is C:\Windows\System32\Rundll32.exe
You can view the running Rundll command by looking in task manager: