Well, I'll tell you what I've experienced step by step, and let you decide from there. First of all, I'm talking about working strictly within iPhoto 5 and not making any edits to any files using an outside image editor.
The original RAW file is located in the "Originals" folder. iPhoto 5 reads the data from this file to generate a jpeg that is stored in the "day of the month" folder.
When I edit a picture in the iPhoto GUI, it doesn't make any changes to the original RAW file. It does, however, generate a new jpeg in my "day of the month" folder.
Apple claims that iPhoto 5 reads data from the original RAW file when you edit with iPhoto tools, then generates a jpeg based on the changes you've specified.
So, you're not changing the RAW data itself; you're actually generating a new set of instructions for interpreting the data, that results in a new Jpeg that's displayed in the iPhoto 5 interface.
This is a somewhat confusing process, but it makes perfect sense to my mind. I should have written that sentence better. But in that section of the article, I wanted to focus on the convenience of being able to work with Jpegs and not having to go outside of iPhoto just to generate a slideshow based on RAW images.