Newbie Q: Tool radius

OK, I'm getting a basic understanding of the CAM side of things...
been playing around with Kcam and Master5 demos, touchy-feely stuff...
BUT I just can't understand tool radius.
If I have a dxf of a part to be routed, do the drawn lines indicate
the center of the tool path? Or is there an offsetting by the tool
radius? Kcam display seems to show the cutter staying on the line,
changing radius just makes a bigger cut.
If offsetting is happening, how does the software know which SIDE to
offset on?
Or do i just have to draw the actual tool path in the first place?
No help in the help files...
patmat