Well of course, the short answer is "Yes. It does". The longer answer is "Yes it does because this is the point of mulching and it's more 'in' the lawn than 'on' it".
What it doesn’t do is just leave regular grass blades lying on the lawn causing an unsightly mess. That would be a rather destructive thing to do.
A mulching deck, or the use of a mulch plug, does something far cleverer and more productive than that.
The grass blades are not just cut and dropped. They are kept in the body of the deck, sometimes with the help of deflectors, and cut several times, reducing them to tiny clippings.
In dedicated mulching decks, this is done by specially shaped blades. (See image below)
The clippings are then forced down into the turf, (see inset image above) by the draft created by the blades, where they break down and create natural compost, very quickly taking nutrients like nitrogen and phosphates in to the lawn and encouraging micro-organisms to channel the nutrients into the soil.
There is also calcium and many other compounds present in the clippings which are beneficial to the turf and this simple but effective process helps the lawn to be healthier, more lush and greener into the bargain.
This process is becoming increasingly popular, and for good reason. It's environmentally friendly, organic, it recycles grass blades, improves your lawn and saves time and energy.
So does mulching leave grass on the lawn? Yes. Thank goodness!