»how do years pass in the Matrix?«

We know that time passes in the Matrix at the same rate as in the real world. The Matrix has existed for hundreds of years. And yet, inside the Matrix it's always the late 20th century or early 21st century. How does that work?

In a previous version of the M1 script, it was said that the Matrix was progressively going back to 1980 and then repeating the same cycle of 20 years over and over.

Since it was erased from continuity, it's not canon but the brothers had that idea in their mind.