It's placed in memory. Depending on the size of the resultset it can also be dumped to disk.
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This is an assumption based on what I have observed. Run a report with a large data set an you can see the ssrs process memory usage go way up. At a certain point there will be temp files created in the ssrs temp directory when memory usage gets to high. I've read that it gets put into the report server tempdb but mine is tiny and I know I've had result sets that were double the size of the report tempdb.
Good question. I'd kind of like to know for sure.