Everyone who wants to know about how transaction replication works and how to improve the performance of transaction replication must read a great blog :

http://blogs.msdn.com/chrissk/archive/2009/05/25/transactional-replication-conversations.aspx

Summary:

log reader read the transactions(Changes) with sp_replcmds, for xp_replcmds.

then log reader writes into distributor database using sp_MSadd_replcmds

Distributor reads commands using sp_MSget_repl_commands

Distributor writes command to subscriber using sp_MSupd, sp_MSins, sp_MSdel stored procedures

Log reader and distributor keeps the history at distributor database with MSlogreader_history and MSdistribution_history  tables.

This is very important information everyone should know.

Thanx.

Vinay