This is undoubtably the tenet that throws and baffles most people, in connection with Theodism, because Theodism is defined as a "lawless" community, so how can.... etc. etc. etc.
The best way to understand it is this: When we call Theodism a lawless community, we are using the term "law" in its modern connotation; i.e., the idea of regular codified statutary law. In Theodism, we don't have that; we operate by what we call thew, or "traditional tribal mechanisms" by which tribesmen regulate their behavior.
In elder times, "law" did not have the modern statutary connotation; it originally meant "layers in the Well," or defining historical tribal experience. It was that body of collective experience that any tribe based their regular folkways on, thus evolving over time a body of "ae" or what we call thew, which was how everybody did things and was in fact more binding on people, morally speaking, than modern law. And that is the way we still operate, and have always operated, in Theodism; we understood that principle all the way back to 1976, having originally had an Anthropologist amongst us for our first tutor.
On the other hand, when we say "the King's word is law," we are speaking of law not in the modern way but in the old way, the sense of layers laid down in the well, because the King has the primary sacral responsibility for the luck of such layers, and must always be kept empowered to maintain it. What it means is that the King's word on anything is holy and inviolate; to appear to question or fault it, at least in any unthewful way, is a sacrilege. Also, of course, that if the King ever did speak falsely for some reason, the gods would be sure to overhear it and be offended. The King's word on anything needs no witnesses to validate it or back it up, and can't be challenged in a "court of law" or in Thing or any other such venue, period.
There are of course some people who do get to argue with the King; his Witan, or his Thyle, for instance. They can only do that, however, in the best interests of the tribe or community, because that's their job description, and not for any preferential treatment or personal or political interests of their own. Ultimately, the way it all works out is that, for example, if the folk take some felon and want to outlaw him, the folk thing can try the case, and can deem, but they can't actually outlaw him, other than locally, from their aett, because the man still has his wergild with the king, and that's a tribal sacral matter. What they accordingly have to do is take his case to the King, convince the King and ask for the wolfheading, and then, if the King does it, it is then a done deal, with no way for anyone to question it, because the King's word cannot be challenged or gainsaid. Similarly, if the King should accuse a man, he automatically has no defense. The King can himself wolfhead someone on his own, if he so chooses, because no appeal is possible without inherently calling the King's word into question.
In a "lawless" community, obviously the Kingship itself has no official legal status, it's just a cultus, and the terrific power that a sacral King has is all in the Web of Oaths, in his exclusive power to raise the fierd, and in the fact that "the King's word is law." But obviously that is all the power that anyone would ever need and then some. The object of such thew, however, is not really to specially empower the King. In any healthy kingdom, that amounts to far more personal power than any King would ever need or use. The real object is merely to keep such power out of the hands of everybody else, in order to prevent "adventurism." In even a good healthy kingdom, people being what they are, there will always crop up occasional disruptive people and interests that will seek power for their own purposes, even sometimes creating and exploiting "black markets" in under-the-table personal power, to exercise in ways that might not always be any too healthy for the common weal; we all know that's just human nature. In creating and empowering the institution of sacral kingship, then, what tribes did was to create a kind of "power czar," rather like a baseball or football czar, who is responsible for all the power in the kingdom and for keeping it all strictly white-market, and available for the common weal only; never any other speculative purposes.
In such case, it might well seem that the King would or could rule with an iron hand, simply running everything according to his own despotic whim. But of course, as so often happens, that's not the way it works out in practice. In practice, the King rules very little; as little as possible, generally speaking, since he normally has thanes and reeves to do all that routine administrative stuff, who have enough white-market power to do their jobs because they are working for the King, but other than that prefer themselves to just do their jobs and try to keep the King out of their own and everybody else's hair. Thew-bound non-adversarial folk communities tend inevitably to be pretty self-regulating, and normally in such communities that government is best which governs least, and everybody knows it, including the King. The King has to be present and officiate at community blots and other such affairs, even in battle, and of course at Thing, for the sake of his luck. However, at Thing, which is where most of the community's real business tends to be done, the King is normally just there for a distinguished guest and good luck charm, to impose the King's Frith by his presence, and will normally do and say very little, unless the folk themselves need for him to do or say something on occasion.
That is not to say the King never rules or guides his community, however. He very much does so, but normally only in special ways peculiarly appropriate to Kingship. The King can set custom, style or thew on nothing more than his own word and whim, for instance, if occasion should warrant. And, since he is understood to regularly and uniquely have the ear of the gods, he is traditionally responsible for what is known as "raed and thyle." Raed is public, or sometimes private, advice, which means that when a King speaks out on any given matter, it tends to be influential in the community and always taken very seriously, since it will tend to be of some unusual kind and presumed to possibly be inspired by the gods themselves. And if the King should (on much rarer occasions, needless to say) pronounce thyle, that is always taken to be direct marching-orders from the gods themselves, given to the folk through the king, and no one is allowed to disobey it. So I hope that gives some idea of how "the King's word is law."