Thank you Patrick/Julio, for your response.
I was trying to figure out what (if any) code we need to ship to execute a component on a particular node. In that process, I removed all the class files for the application in question from the $SFHOME/lib location. To be sure, I also removed them from $SFHOME/class location. Yet the classes are loaded properly. I just wanted to know how the SmartFrog Deployer loads a class when the location pointed to by sfClass attribute does not contain the class.