Pre-Froyo, apps could only be installed on a separate EXT partiton using apps2sd. They can be found in /system/sd/app (or app-private). With Froyo, apps can now be installed on the normal FAT32 partition in the .android_secure folder.
I'm not sure where the "move apps to SD" recovery option actually moves them to; with apps2sd-enabled ROMs such as MoDaCo the move to EXT is automatic on first boot if an EXT partition is recognised.
Note that, when you mount the device on a PC as a removable disk, it is only the FAT32 partition that is shown.