In short, an MTH TIU is not a power supply - it is a digital command interface. The Track Interface Unit (TIU) is the brains behind the DCS system. Connected between the transformer and the track, the TIU receives signals from the DCS remote control and relays those signals to each train you are controlling via the rails. The type of signal relayed to the train depends on the operating mode at the time. If operating conventionally, the TIU will raise and lower track voltage to control engine speed. If operating in command mode, the TIU will send a digital signal to each train you are controlling via the track rails.
Pg 113 of the manual discusses operation of Conventional Locomotives using a DCS system with a TIU,
Pg 11 starts the section on wiring, including the use of classic transformers.
The manual itself:
As for differences, off the top of my head:
- With a classic transformer, a pure sine wave signal is sent to the track. With command systems, most variable control is done electronically and therefore produces a modified sine wave to the track. This modified sine wave can cause some components to run warmer; This is seen as a benefit for smoke units. Note that this un-pure sine wave can be detrimental to some the operation of sensitive electrical components, notable some MTH PS1 locomotives are very picky in conventional mode.
- With a classic transformer, the full voltage range can be directed to the track. Some of Lionel's transformers, this can approach be 24VAC. Common command systems such as MTH DCS is restricted to a voltage of ~18VAC.
- Some classic transformers have a 5V boost to compensate for the additional electrical demands of the air whistle motor. The common command systems do not provide this boost.