VS Code has three extensions related to TypeScript:

• extensions/typescript - this is an npm install'd version of TypeScript.
• extensions/typescript-basics - this is a extension which provides language grammars and defines the language of TypeScript inside VS Code
• extensions/typescript-language-features - this extends the TypeScript language support with commands, auto-complete et al.

A large amount of the work happens in the TypeScriptServiceClient which is the VS Code side of the TSServer.