The telephone does transmit it's data in this case to an onboard transceiver (mobile telephone base station if you like). This in turn is transmitted via satellite link to a computer system where the data is routed to it's destination via normal networks.
Pullock - Are you saying that you use your own mobile phone on the aircraft to send and receive the SMS? If so then this is incorrect. You are using the seat unit as stated by LAME.
...in flight SMS messaging where you will be able to send anyone you want to an SMS message from the unit at your seat...
In regards to interference - I'm sure some Metro 23 pilots will confirm that you can tell when one or more of the PAX has a mobile phone switched on as you can hear it 'pulsing' through the pilots intercom system as you leave the area of mobile phone coverage.
When you get on the PA and ask them to switch them off you can see them wondering how you know that they have them on!
Cheers
CB