Hi @tejas18
My understanding (based on my own experiences) is that once you have built the Experience Fragment (XF) in AEM and click the "Export to Adobe Target" button - the XF will be exported to Target at that point in time.
If you then make further changes to the XF in AEM, these won't be reflected in Target until you click the "Update in Adobe Target" button which will re-sync the latest XF to Target again.
Based on this I assume that the underlying XF code is physically exported to Target rather then just a reference.
Docos: https://experienceleague.adobe.com/docs/experience-manager-65/administering/integration/experience-f...
Thanks,
Jacob