If you run in Normal mode, then Simulink runs interpretatively, without generating any C code, except for the parts of your model that use Stateflow charts or Embedded MATLAB function blocks.
However, if you run in Accelerator or Rapid Accelerator mode, then Simulink generates C code from the model before running it. For more details, see Accelerating Models in the Simulink documentation.
HTH,
Arnaud