Just to go a bit more in depth on how physics are handled(I built a rather robust 3d physics engine from scratch).

If we simply are talking about handling two objects hitting and then reacting to the hit we must first divide it into three seperate distinct phases.

The first phase is searching for raw collisions. What this means is that in this phase we only care about the absolute case of whether two objects are in some way colliding. Things like speed, acceleration or rotation do not matter because we only care if the objects have overlapping bounding boxes. This stage is where we usually opt to use something like an octree(or the two dimensional equivalent, the quadtree). To make it easy to understand just think of an octree as a way to narrow down the potential collision checks in our world. If we didn't use something of this nature we would have to manually check each object against every other object that exists in our world.

Once we have compiled our list of collisions we can now begin phase two. This phase is known as contact generation. Now that we know that two objects have collided in some way, we now need to determine in what way they collided. There are an almost unlimited number of contact combinations but to make it easy to understand lets imagine two cubes colliding. A cube can be described by its corners(or points), it's edges and its faces. Using these parameters we can determine the number of potential contact schemes that could exist when two cubes collide(ie) face to point, point to point, point to edge... ect). This is important because it drastically effects the way the object acts during the following collision.

Now that we have generated our contacts for each collision pair we can now complete our final step. This step is know as collision resolution. During this final step we take all of our previously generated data and use it in combination with things such as the objects speed and acceleration, hardness and friction to determine the resulting impulse(or force) that we need to apply to it. One other small note is that we must set a value known as its interpenetration value. This value is used to determine how much each individual object should be allowed to "go into" another object before acting as if there is a collision. Clearly this does not mimic real life physics but instead is needed due to our discrete physics computing model. At this point if everything was done correctly objects should collide and react correctly.