OK, so Justin gave us a great description of how a "sand seal" is added to a VW engine, and Danny P. gave us a bit more info and also that the "sand seal" keeps dirt out, not the oil in, so how, exactly, is the oil kept in the engine if it isn't "sealed"?
Well, that takes some ancient technology call "Centrifugal Force" and a clever use of it, developed during the early part of the Industrial Revolution. Look here V....
This shows the internals of a stock, VW engine with the fan pulley on the far right.
Just inside of the case from the fan pulley is a circular cavity that the crankshaft goes through and attached to the crankshaft inside of that cavity is a "Slinger Washer".
That cavity has a drain hole in the bottom that allows any oil entering in there to drain back into the sump. Just to the left of that cavity is the front (toward the pulley) main bearing, which has oil, under pressure, between the crankshaft and the bearing. When the engine is running, that oil squeezes out on both sides of the bearing, mostly going back into the sump but some of it ends up riding the crankshaft into the slinger cavity, where it hits the washer and centrifugal force slings the oil outward into the cavity to then drain into the sump through the drain hole.
Pretty simple, huh?
And THAT explains why, when we have too much crankcase pressure (from an inadequate breather box) some oil gets forced out behind the pulley and leaks. Too much for the slinger washer to handle, or the case pressure simply blows some oil out past the washer. Either way, there is no "seal" there, just an oil management system that works well for a stock engine, less so for a larger displacement engine unless case pressure is more equalized.
I don't know (never worked on one) but I bet that a type 4 engine has a real seal behind the pulley....
Hope this helps.....gn