The s is the substitute command of sed for find and replace. It tells sed to find all occurrences of 'old-text' and replace with 'new-text' in a file named input.

Does sed change the original file?

By default sed does not overwrite the original file; it writes to stdout (hence the result can be redirected using the shell operator > as you showed).

Does sed Save changes?

sed does not do in-place editing. It creates a new file and overwrites the old one, the inode changes. @Marco That's the safe way of editing a file in place.