The Inspire system can support many models. The one that is shipped with the plugin for 3.3 is based on the "Community of Inquiry" theoretical framework. The social and cognitive indicators measure two different types of engagement.
First, each activity type has been defined according to how much social "breadth" and cognitive "depth" that activity can offer. For example, as you pointed out, a Book activity does not offer any social interaction, because learners read the Book content in isolation. A Book does not offer much cognitive interaction, either, because the learner has no opportunities to submit any content for feedback or to offer feedback of their own. A Forum, on the other hand, offers a wide range of potential social contact and also provides a capability for a learner to both receive and offer feedback, and to revise their own concepts. We then compare the available opportunity for engagement to what each student actually did with the activity. These data points are used to predict the likelihood that a student will complete a course for credit, based on the experiences of other students at the same institution. This particular model is intended to be used in fully or substantially online courses with a variety of activities over a span of time. Some additional models are supported in 3.4, and the API allows anyone to add to the models.
More information about the models in the plugin and in the Core functionality to be released in 3.4 are available in the Inspire community area: https://moodle.org/project_inspire -- this is also the best place to ask questions or offer feedback.
I hope this has been helpful,