It basically creates a new draft that includes your template changes. You'll have to approve or re-approve the draft in order for your changes to be visible on any live pages. (The old version will stay live until you do.)
You can see a readout of which pages are using the template in the Landing Pages area of the Design Studio, which makes it easy to do a mass approval. Depending on how many pages use that template, this might be more efficient than going program by program in the Marketing Activities view.
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