It uses the entire sensor and interpolates, unless you tell it otherwise (I think it's labeled "smart teleconverter" or such). Whether that improves high ISO performance or not is something *hotly* debated, but general consensus seems to be it doesn't do jack or, if it does help, it's less than what a half-decent NR program would do with a full-resolution image.
|Street Food by poppyjk|
from Your City - Local Street Vendor
|Tomato Clownfish by chile7236|
from Fish world
|Vermont-Autumn by kevinplui|
from My Best Photo of the Week