How does the Java compiler work when you have a class `c` inside itself?

Consider the following code

public class myClass{
    myClass instanceOfNotYetDefinedClass;
    ... //etc code
}

I don't understand how the compiler manages to understand that: I'm telling it to create a class, and then it says: "OK! Let me see what this myClass class has. Oh, its a myClass, let me see whats this has..." etc.

It may be a pretty noobish question, but I really don't understand how this could be handled.