Photogrammetry, ground textures and geometry are all indeed streamed. What you are storing on your computer are custom built 3D structures (like airports) and autogen building blocks. For a standard wilderness scene, the geometry of the ground along with the textures are downloaded. The sim also downloads vector maps that tell it where roads are, where forests are, where water is, where there are houses, etc. Then the game goes looking through the assets you have on your PC and starts populating the environment with roads, houses, trees, water, etc.
This is needed because you would need a ridiculous amount of storage space to hold the entire planet in the present level of detail. Although you can try, by increasing the size of the rolling cache.
When you internet connection drops, the sim reverts to a much lower resolution ground mesh and texture which is stored on your PC.
And aircraft are in their entirety stored on your PC.