It just bumps up the claimed numbers on anything, so there's only a couple thousand actual sims being simulated and the "phantom" sims just appear and disappear at places to make the numbers bigger.
But from a programming perspective that is pretty much what you should be doing.
Nobody cares about the lives of all 150,000 sims. They might get maybe six or seven they really care about, if they are that kind of player. Sims that just exist as population statistics is ideal.
Why do we want all those sims existing as fleshed out entities? Does anybody actually care?
It's not that I want to know everything about my population (not like you can since they disappear as a unique entity once they stop being an agent and enter any building) it's that when I have 90,000 people only 10,542 work, and I have 24K jobs that need to be filled.
Also you can open the pop panel and the see that the green bar (labeled resident population) represents the true number and not the fabricated pop number. I first noticed it when my example city above had 11K people commuting in and the orange bar (labeled visitor population) was larger than the green one.
I could kind of get behind it, if the numbers weren't so extremely false. (like if I had 30K workers from a 90K pop)