It does not modify them as they would be if you were modifying them manually and it does not modify them on the fly
vBulletin keeps two version of the templates in database: The orginal version (that is being used for display and editing in style manager) and a compiled version (that is actually being used for displaying templates in frontend).
TMS hooks into the compile process and changes the templates just before they are being compiled.
This means, that the compiled version is changed, but the template is still considered unchanged - you also won't see changes in style manager.