Checked the source code, it actually downloads only the audio stream. The video stream is removed ( not downloaded at all ) from every stream that is played when then extension is activated. Confirmed from the network pane.
Loved that I can turn it back on while watching a trailer or news. With the extension turned on my laptop lasts significantly longer. The data consumed by youtube has also decreased a lot.
What would have really helped was if it could cache / store most frequently watched youtube videos. That would have really reduced data consumption.
Very useful to people with data caps / FUP. Do hope it updated when youtube next changes their site. Keep up the good work.