Both, if something breaks like your power adaptor or battery they will replace it. If your notebooks has problems they will do whats economically feasible. If they are constantly repairing the same problem, the lemon law goes into effect and they will replace the computer outright. There is a thread in this section where that just happened.
EDIT: Let's say your notebook's screen, video card, speakers and motherboard all go out at the same time because Zeus struck them with lightening, they are going to just replace the notebook. The economically feasible quote relates to what makes sense for Apple. Because screens cost so much money if a screen and a couple other things go, they are probably just going to replace the unit. (Same theory behind totaling your car)
Obviously this varies. But, they are very fast usually with service. They will often times mail the computer from the Apple Store to a service center and have it back within five days.
To get something replaced or repaired you have two options: phone or genius bar. I have used it and find that your service is prompter and often times broader. For example, the genius bar doesn't like replacing batteries that bulge. If you call they will ship you a battery and a prepaid box for free. When you call often times you can talk to someone who can make decisions which is a huge benefit. This is obviously for those who do not have an Apple Store with in close distance. I used it to have my screen replaced in five days while I was at Wake Forest, as opposed to driving 6 hours to the nearest Apple Store.
As long as you don't actually put it in there and something does go wrong, they will fix it. Apple's policy is to fix the computer until it works, so if you bring it in on the last day of warranty, they will fix it until you have a working product. (And guarantee the work for 90 days I believe)
