Wow. I totally forgot that Commodore BASIC ignores spaces in variable names. I do remember that it ignores anything after the first two letters though. That said, there's a bit more going on here than meets the eye.
PRINT HELLO WORLD is actually parsed as PRINTHELLOWORLD, that is: grab the values of the variables HELLOW (which is actually just HE) and LD, bitwise OR them together and then print.
Since it's very likely both HE and LD were undefined, they were quietly created then initialised to 0 before their bitwise-OR was calculated for the 0 that appeared.
Back in the day, people generally didn't put many spaces in their Commodore BASIC programs because those spaces each took up a byte of valuable memory. That PET2001, if unexpanded, only has 8KB in it.