Cant understand this line of code , how does it keeps running after wasDispensed = true ,

The true statement doesn't change the value outside of it.

public boolean dispense { //We want to dispense some candy out of the Pez dispenser
  boolean wasDispensed = false; //it's set to false because we didn't take any action yet
  if (!isEmpty) { //obviously, in order for us to dispense something, we need to be sure there is something there
   pezCount--; //if there is, we dispense
   wasDispensed = true; //it's set to true in order to check whether we dispensed something
}
}

in "wasDispensed = true" the value is set to true in order to check if we dispensed something, the code within the if statement will work until pezCount will be down to zero and there is nothing left to be dispensed. In this case, wasDispensed is not true anymore because there is no candy left to be dispensed, which will bring back the value to false.

public boolean dispense()  {
 boolean wasDispensed = false; 
 if (!isEmpty())  {
 pezCount--; 
 wasDispensed = true;  
}

Okay so there is a boolean variable wasDispensed set to false and then there is a function isEmpty() which checks whether the Pezdespenser in empty or not.In the code you are calling the the invert of isEmpty() Function in the IF block which in words would be IF its not empty(i.e if the pez is not empty) the decrement PezCount by one and change the value of wasDispensed from false to true.So the code would run utntil the Pez in not completely emptied i.e until the pezCount reaches zero.