How the group policy in domain environment applied ?

in a domain group policy is applied from the active directory to a particular user, group or OU. 

Group Policy always applied in this sequence LSDOU

It’s group policy inheritance model, where the policies are applied to Local machines, Sites, Domains and Organizational Units.

First the local group Policy is applied => then Active directory Site Policy => Domain Policy => Organization Unit Policy

If same policy is applied to multiple location than lower one take the precedence over the higher one.

Example: if you apply any policy on local computer (from gpedit.msc) and the same policy you applied to Domain then domain policy will override the local policy.