Tyler saw that the machine was activating a change he wasn't expecting based on their conversation. Penises, sweat, the need for sexual release, and BO, he had good reason to be terrified...
They were just a room over and within range of the emitter, the Chronivac wasn't JUST listening to their dialogue, it was also analyzing their relationship with a bias towards making the user happy, in this case Tyler.
The AI however, like the Chronivac 4.0, was a prototype. Therefore it shouldn't be too much of a surprise that it read their relationship, all of the red flags identifying Ty's abuse and inability to stick up for himself, Ty's jealousy, and Zach's many attributes in which he took pride in.
The machine set up a system that would chastise Zach for abusive behavior toward Ty, and alternately reward Ty for sticking up for himself when Zach makes him uncomfortable.
If Zach treats Tyler in a way that would be considered harassment, sexual or otherwise, or unprompted disrespect, one of his prized attributes will diminish slightly, eventually stopping at average. If Tyler sticks up for himself, one of his attributes pushes its way towards Zach's original status.
Each is only aware of their own changes, not each other's, the world is unaware, and each of them is unable to read their or the other's changes until after whoever is trying to read it leaves college. (Graduates or drops out.)
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'It says "Changes applied" but I don't see anything different...' Tyler thought to himself reviewing the computer... 'Strange'
"Yo, you done finding excuses to pussy out or what?" Zach called losing half a pound of muscle across his body.