The mosaic dataset acts as a form of catalog that defines the location of all raster data sources as well as associated metadata and information on how the data should be processed as it is accessed. When a Mosaic Dataset is added directly into ArcGIS Desktop, ArcGIS Desktop accesses the required imagery directly. If the data is in a file system then the required files are opened and read, if the pixel data is stored in an enterprise database then a connection is made to the database and the pixels read from the database.
If the mosaic dataset is served as an image service through ArcGIS Server then when a client application makes requests for imagery it is ArcGIS Server (one of the SOCs) that makes the required requests for pixels data from the file system (or database connections) prior to performing and required processing before streaming the pixels to the client application.
