well sort of. What happens is that all the occurances of the string %HTTP_HOST% will be replaced with whatever is returned from &handleEnvVariable('HTTP_HOST') in $_[0], and THEN all the occurances of the string '%REMOTE_ADDR%' will be replaced with whatever is returned by &handleEnvVariable('REMOTE_ADDR')... and so on. . .

So in each line the string is modified by substitutions if the pattern exists in the line.

It could be shortened down to:

$_[0] =~ s/%
            (HTTP_HOST|
              (?:REMOTE_
                  (?:ADDR|PORT|USER))
           %/&handleEnvVariable($1)/gex;
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-enlil