What is really happening?

What is really happening here when using AspectJ? Is the compiled class of the original java source modified to have the code specified in the .aj files included? Or do temporary .java files get created with the code from the .aj files weaved into them and then compiled? Or is it something completely different?

I'm just trying to get my head around AOP. What I am seeing is that ultimately, the various class files are containing the modified compiled code, it's just specified in a central location. Is that correct?
From the perspective of the final compiled classes, you could put the code in the actual java source and it would run pretty much the same but instead the weaver takes it from the .aj files and inserts it.
I know I've got some terminology wrong but I'm just trying to understand the basic concepts here.