Recursive methods get placed on the stack and it helps to think of them like a stack data structure.
The key to understanding why it's printing after "wo" is in the following lines:
System.out.println(w);
String v = w.substring(0, l-1);
recurse(v);
System.out.println(w);
Notice that it does the following:
1. Prints the current word
2. Gets a new word that is 1 character shorter
3. Runs the recursive method on it
4. AND THEN PRINTS THE ORIGINAL WORD AGAIN
That last part is the key. After we've given the recurse(...) method a word of length-1 it exists the recursive loop and pops off the stack.
By popping off the stack we return to wherever we left off in our code and continue executing the remaining lines.
I'll try to comment below to show what's happening starting with the word "wo":
System.out.println(w); // w is "wo"
String v = w.substring(0, l-1); // v is now "w"
recurse(v);
System.out.println(w); // w is STILL "wo"
Image:
http://pasteall.org/pic/show.php?id=...bd07ddab091fff
When a method exits it always has to return to where the calling code executed. In our case recurse(v) returns and the next line is a print statement.
I hope this makes it a bit clearer.