Events are generated every time the user does anything significant on the site, such as editing a page.
Optionally, a log of these events can be kept. You can keep either all events, which could be a lot of data and database activity on a busy site, or only those events pertaining to the masquerading of an administrator as another user when using the "Log in as" functionality. This log is kept in the event_log table in the database. A report of masquerading sessions is available in the "User reports" section of the "User search" administration page.
No matter which setting you choose, all events are still logged in the access log.