I'm not a financial expert, but based on the explanation given in the prosecution arguments at Nuremberg against Hjalmar Schacht, they were a method of borrowing by the Government using a shell company to accept debt instruments issued by armaments producers. by which the Reichsbank could indirectly lend to the Government to pay armaments manufacturers. Someone could buy the debt from MEFO, (i.e. the government) and sell it to a bank, who could then sell it to the Reichsbank. This indirectly meant that the government was paying manufacturers and was in the end funded by the Reichsbank. The process was used because it was both illegal to directly lend for this purpose, and likely because it was thought making it legal would be noticed by outside states, and revealing the rearmament programs.

Outsiders likely weren't aware because the system was well thought-out - from the outside, the government isn't involved at all, and without access to records and details that would show MEFO was simply a shell, you wouldn't know.