It seems to record shows as they air. How they are stored is a decent technical question but I'm not sure it is important. The important part is what is available to play back.
So it's based completely on the default padding, provided that the default padding is adequate to get the entire show. This also suggests that the blocks remain intact and are not pre-chopped up, until the user wants to copy out from the PTA area.
Series timers can still be set for your favorite shows, and those recordings will be kept as long as you like (within the settings of the DVR).
This being day 3 of release there are a few who can test saving programs one didn't have a timer set for, and other issues. CBS is a good channel tonight with the NCAA Basketball Tournament automatically starting at 7:30pm and 48 Hours scheduled at 10pm. If the game goes past 10 we can see what "late sports" does to PTA timers.