Basically, HRT does two things to help hair out.
First of all, HRT blocks the production of testosterone, and so therefore it also blocks the hair-loss-causing Dihydrotestosterone. DHT basically latches on to hair follicles, rendering them weakened and inactive, then slowly killing them. This is what causes male-pattern baldness. So part one of the hair equation is the removal of DHT. This allows the weakened hair follicles to recover, and grow hair again. (If, in areas of hair recession, there is still a lot of peach fuzz, that means that most likely the hair is still salvageable, and has only been rendered inactive. Once the DHT is removed, it should grow back at least partially. If the patch of scalp is shiny, however, then the follicles are dead, and they're not going to grow back.)
Part two of the equation is estrogen. Estrogen keeps hair in its active growth phase longer. So a higher percentage of hair will be in the active growth phase at any given time, and it will stay there longer, which means that hair becomes thicker and can grow to a longer length before falling out and going back to the inactive phase. (This is generally what causes hair loss in women, is that when they go through menopause, E levels drop, which causes the hair to be in its inactive phase longer, making it thinner.)
I've heard it said that HRT can reverse approximately 5-7 years worth of hair loss. And even if there is no hair loss, the extra estrogen in the system should, once again, result in thicker hair, and should help it be able to grow to a longer length.