[Haskell-beginners] type class question from MReader #8

[MH]

I am reading the article from Monad Reader issue #8 called Type-Level
Instant Insanity
by Conrad Parker and I don't understand the part on recursive types.

data Nil
data Cons x xs
data x ::: xs
infixr 5 :::

class ListConcat a1 a2 a  |  a1 a2 -> a where
          listConcat :: a1 -> a2 -> a

instance ListConcat Nil a a where listConcat = _|_

instance (ListConcat xs ys zs)
              => ListConcat (x ::: xs) ys (x ::: zs) where listConcat = _|_

1. How does the last function becomes recursive?
2. Why do we need constraint  '(ListConcat xs ys zs) =>' ?
3. I assume that listConcat function takes three arguments but from
example provided, it takes two (see below):
4. Does the functional dependency sign (->) implies that the last
argument is the return type?

Main> :type listConcat (u:: R ::: G ::: B ::: Nil) (u:: W ::: Nil)
            listConcat (u::R:::G:::B:::Nil) (u::W:::Nil)::(:::) R
((:::) G ((:::) B ((:::) W Nil)))



Thanks a lot.

Malik