Quite simple really; Versailles had allowed Germany a 100 000 man army, on top of which Germany had officers hidden in the ranks as 'NCOs' and working in various government organizations like the Reicharchiv. They had the 'Black Reichswehr', a clandestine organization that kept the Freikorps paramilitary groups on standby in case they were needed for war, and the German border and internal/state police were heavily militarized. The actual German Army was quite large.
More importantly, the Treaty of Versailles had been a non-entity long before the creation of the Wehrmacht was announced in 1935; since the Lausanne Conference in 1932, Reparations had been suspended. Germany's economy had been doing well since 1924, so once Hjalmar Schacht's economic policies were put in place after the Great Depression, and Germany began to recover again, there was little to stop Hitler from re-armament.