One of the features in the soon-to-be-released libinput 1.13 is location-based touch arbitration. Touch arbitration is the process of discarding touch input on a tablet device while a pen is in proximity. Historically, this was provided by the kernel wacom driver but libinput has had userspace touch arbitration for quite a while now, allowing for touch arbitration where the tablet and the touchscreen part are handled by different kernel drivers.
Basic touch arbitratin is relatively simple: when a pen goes into proximity, all touches are ignored. When the pen goes out of proximity, new touches are handled again. There are some extra details (esp. where the kernel handles arbitration too) but let's ignore those for now.
With libinput 1.13 and in preparation for the Dell Canvas Dial Totem, the touch arbitration can now be limited to a portion of the screen only. On the totem (future patches, not yet merged) that portion is a square slightly larger than the tool itself. On normal tablets, that portion is a rectangle, sized so that it should encompass the users's hand and area around the pen, but not much more. This enables users to use both the pen and touch input at the same time, providing for bimanual interaction (where the GUI itself supports it of course). We use the tilt information of the pen (where available) to guess where the user's hand will be to adjust the rectangle position.
There are some heuristics involved and I'm not sure we got all of them right so I encourage you to give it a try and file an issue where it doesn't behave as expected.