Well, Joe, that's a good question, and I don't know the answer. I can tell you what I do, but not what MT does.
MIDI to sheetmusic: I use my file manager to stick the midi file in the Musictime directory (drop and drag), then I open MT and in the tune file, I click down to the option that says MID file. (You know like how wordprocessors give you different choices of format? i.e. *.wpd, *.wri, *.txt?) Well, this program gives you choice of *.mus, *.mid, etc, and when you choose *.mid, it converts it to sheet music and prints it out on the screen that way.
To go the other way, I just save it as a '.mid' file instead of *.mus.
Cool, huh? Simple enough for idjits like me, even.