Hi @deathb4decaf,
My experience using it is that it works in two ways, depending on how the setup is configured.
If you link assets from AEM, the images stay in AEM, and Campaign just references them. So, in the case you update the image in AEM it will be reflected in your email inside Campaign too.
Another way is that if you are importing directly from AEM, assets get copied into Campaign resources and they take part of the email delivery itself.
You can check this additional documentation for the configuration:Configuring access to assets
Hope it helps!
Best regards,
Celia