yeah, this is it. just didn't know that max() can have key argument.

The key arg of max takes a function. The lambda is that key function. The return value of the key function is used to find the max.

I understand how max(), ord() and sum() works. However, I don't see lambda function called somewhere? how does it work?

Describing tasks is not an easy task :-) So, when you do not understand it, check the examples:

count_by(1,10) #should return [1,2,3,4,5,6,7,8,9,10]
count_by(2,5) #should return [2,4,6,8,10]

and try to figure out how the results were calculated.