It sucks in air from inside the case but how does the heated air get out of the PSU?
As air is pulled into the PSU by its fan, the air pressure within the PSU will increase. This pressure increase will cause air to be expelled through any PSU opening where there is lower air pressure on the other side. So most of this air would exit through the backside of the PSU into open space outside the PC case.
However if you inspect the PSU thoroughly, you should also find openings that face into the PC case. (These openings exist to ensure proper air circulation within the PSU so that deadzones and hotspots are minimized.) So if the PC case is not pressurized (by case fans that pull air in) to a level greater than within the PSU, some of the air heated by the PSU will be recycled back into the case instead of being expelled outside.
Due to this recycling of heated air, I avoid using PSUs with 12cm fans. (FWIW I also think cooling in a PC has been marginal since day one of the IBM PC.)
but we all know that hot air doesn't travel sideways unless forced.
A pressure differnential (the outside of the PSU enclosure needs to be at a lower pressure than inside) is supposed to provide this force.
Also in my case the PSU sits atop the CPU heatsink so the air drawn inside the PSU might already be quite warm. Isn't this inefficient?
(That not the proper use of "sits atop", which implies contact.)
Inefficient is not the perfect word if you're concerned about this preheated air entering the PSU. It's not an ideal cooling method.
There's an additional concern of the proximity of these fans. Both the PSU fan and the rear-case fan are facing the same intake air space and trying to draw the same air. Since the air flow is primarily between the CPU-heatsink fan and the rear-case fan, the PSU fan seems to have poor intake flow.