This is an important question. And why are they called "peppers"? Well, in short, there's no good reason other than that Rudolf Steiner referred to how charred weed seeds will look a bit like pepper. Which is to say, perhaps that the burned seeds might look like black peppercorns.
Call them what you like, but the principle is simple. Within each seed is the principle of life unique to that specific species. A dandelion seed has a unique quality that will only ever produce dandelions and never a barberry plant. We all know this so well it seems almost unnecessary to say it at all!
But it comes down to this: if you destroy the viability of the seed by charring it, there still remains within the seed something unique to that plant. Which is to say, there is something in the germ that still "belongs" to dandelionishness, even though the seed can't reproduce a new dandelion plant anymore. But what can a burnt seed do? It can rot. But this means -- you're probably tracking now -- the charred dandelion seed can only rot, but the charred seed can only rot in a dandelionish way. This means you're really creating a pathogen vector by rotting these seeds, specifically something that will corrupt the seed-forming process of that specific species.
This can be extended to insects, whose entire body is used (too difficult to separate out the most important elements). For mammals, you need the entire skin. The effects of a pest pepper may take several years to work, in part because many pests have different life cycles and do not emerge as adults all at once. The peppers should be used repeatedly and will help reduce the rate of proliferation though it does not directly harm the species themselves.
In Korean Natural Farming (KNF) a similar approach is used to create a pathogen designed to target specific kinds of pests: video. As Steiner himself says in the agriculture course, the pest remedies might even work better if allowed to rot.