So D|S is converting the textures into another format to accomodate the quirks of the
render engine and not just slapping the jpegs, tifs or whatever onto the objects?

Yes, that's it. I don't know the details, but I suppose it's to create a common pic format so the renderer doesn't have to worry about "is this a jpeg, tiff, or whatever?" just consider how many different file formats get used for textures. It's just a bit of preprocessing to speed up the actual render once you hit the button.