Checking out who has the best sense of smell is quite a complex issue. In human bodies, we suck up air through the nose, and “odorants” (the posh word for scent particles) stick to scent receptors that are housed there.
Information is then pushed up into the brain, into a special region called the olfactory bulb. The whole thing is a bit of a mystery, but current thinking is that it acts like a processing unit, taking in information from the scent receptors, packaging it all up in data packets, and then shoving that out for the rest of the brain to analyse and interpret.