It along with diesel fuel, are injected into the DPF system. The added use of diesel fuel as part of the DPF system is what actually drops the MPGs. Not the fluid by itself.
As for the fluid reducing emissions, some of the tests we ran when I worked for Cummins involving reps from the CARB and the EPA had us running engines with out any of that system, then with the system as designed and then using a various substitutes for the DEF such as windshield washer fluid, an alcohol water mix and distilled water. The results were rather inconclusive as to whether DEF actually improved the emissions or if it was the actual DPF and burning of diese fuel that helped lower it.
