How is this done?

[EngravedGiftsUK]

I saw this product on Etsy and I'd love to make something similar. The listing talks about laser engraving but I don't think that's how this is done. Or is it? Is it a cut and inlay job? In which case it would be extremely time consuming, some of the letters are so small. My diode laser certainly can't achieve that level of precision, most of the small details such as the insides of the letters "o" and "a" would be obliterated. There would also be a lot of scorch marks which are not visible here. Can a CO2 laser achieve this? Would it even be worth the time for a £40 box?
I also thought of sticker cutouts but some of the writing is too small for that to be possible, not without going mad in the process. Any ideas?

il_1140xN.5279792631_7fw5.jpg (231.48 KiB) Viewed 280 times

[EngravedGiftsUK]

Thank you, brilliant and very detailed answer. I only have a budget laser (Sculpfun S9). I'm pretty much a complete beginner, CO2 lasers are way out of my budget for now anyway. But your method sounds really interesting so I'll definitely experiment with larger designs.

[EngravedGiftsUK]

Thanks again for the advice and yes if my business goes as well as I hope, next year I'll look into xTool for upgrading.