How does System Generator for DSP actually works?
Sys-gen, as well as Simulink creates HDL code. However, sys-gen utilizes/assigns available DSP blocks, memories, and other blocks available in the specific FPGA to maximize the implementation efficiency. The great advantage of it is that you might not need to look at the HDL script - you can program the FPGA directly (with the help of the ISE suite). It also allows real time simulation. There's a lot to it. You should just watch demos and introductory videos.