A collection of objects of the specified type is created by the CollectionSourceBase.ObjectSpace. For instance, the XPObjectSpace creates an XPCollection. When filtering is applied, the corresponding criteria is directly applied to the underlying collection. So, in this mode, if you iterate over the collection represented by a List View, you will only see the filtered objects.
Two collections are created for a Collection Source. The first one is an original collection created by the Object Space. The second one is a intermediate proxy collection. The proxy collection represents the original collection's wrapper, because it implements several interfaces that are required in different built-in features. When filtering is applied to the collection that a Collection Source represents, the criteria are not directly applied to the original collection, instead they are applied to the proxy collection. So, in this mode, if you iterate over the collection represented by the CollectionSourceBase.Collection property, you will see only filtered objects. But you can iterate over the original collection to access all objects belonging to the collection.
A Collection Source's mode of operation does not affect control-specific filtering features. For instance, the GridControl used by the GridListEditor, allows end-users to filter data via the auto filter row and filter panel. When end-users use these features, filtering is performed on the control level, and is not reflected in the Collection Source.