When you feed it MP3-encoded files, it will decode the files into an uncompressed format that is used for internal representation.
Working on encoded files directly is not easy since audio samples may be interleaved or dependent on others. An audio sample is represented in the percetpual hearing domain – so, what you see in the file is not actual audio: you have to decode it again, using psychoacoustic methods. If you decode the file, you will get an easy to work with waveform with Pulse Code Modulation.
In fact, Audacity will create chunks of 1 MB files as temporary files, and they seem to be just regular PCM-encoded WAV, meaning raw audio. That's also why importing WAVs is so fast – they do not have to be transcoded, they can just be used as-is.