Premier Elements is one of many Non Linear Editors or "NLE"s. They non distructively use clips that remain as original. The in and out points are "markers" used in the final output rendering to you chosen format. In other words, the output process "reads" the portions of your original that are marked and makes an entirely new file. The "unused frames" remain with the source footage but never end up in the output footage.
This is why the project file itself needs to have source files intact if you ever want to re-open a project.