I have often wondered about gun readings. I questioned this stuff a few years ago and this is what I was told (and read).
The gun reads the highest velocity, which is out of the hand.
Fox had an article that explained the velocity drop, and it stated that they can accurately determine velocity by video analysis. They can look at video frames separated by a certain time and measure the distance the ball travels between the frames. This is easily converted to MPH. The video is taken from the side (1st or 3rd base) and must have great resolution and frames/second. Not sure if this is still the process they are using, but it was a few years back, and it makes sense.