Publishing stored proc execution in transactional replication
how SQL server knows to replicate only the stored proc execution (i.e. actual exec myupateproc t-sql command) instead of underlying table data that is being updated on the publisher (i.e. actually replicating 25 million update statement)?

SQL Server knows that when you set up article property as below :



You can explicitly set only to replicate SP defination, execution of SP or Execution in a serialized transaction of the SP while setting up Article property.

Refer here. When you select "serialized transaction of the SP", the entire execution is replicated as a single transaction there by reducing the Transactional Replication overhead i.e. With the replication of stored procedure execution, replication sends only the command to execute the stored procedure at the Subscriber, rather than writing all the updates to the distribution database and then sending them over the network to the Subscriber 

Test it before hand as performing such a large update (25 million rows) will be way too much for replication to handle (depending on your replication topology - same distribution server as publisher, geographically separate publisher and subscribers, etc) and some caveats as described in BOL.

You can probably thing of another approach like --


Remove the current table from replication.
Do you data update and (To speed up things, you can truncate the table on Subscriber if the table is massive - so when you do a snapshot, replication wont have to perform delete on subscriber table)
Add the table back to replication with nosync option
Snapshot the publication, but this time only the snapshot of the table that was added will be generated.