Whenever you create a new Team Site you are presented with a Template Selection Page and you see all the Templates that are uploaded to the server.  Your screen will look somewhat like the following.

Figure 4

In the above example you will notice that I have already created a few Templates.  Initially, the users might guess that these new templates are coming from some files or XML Files. But actually with Team Sites it is coming from the database.  It is not recommended to go and customize the WSS databases.  However, for this example I will just let you know that the Templates are stored in CustomTemplates table in your config database.  Explaining the database structure is beyond the scope of this article.