Hello,
Thank you for reaching out and I am happy to assist you with this.
All images converted with the Image Service tool are sent to a third-party server maintained by the W3 Total Cache team which reduces resource consumption and allows for a large number of conversions in environments where resources can be limited such as shared hosting. Images sent to the W3TC server for conversion are only held temporarily and no permanent information is kept on the server regarding the images.
W3 Total Cache uses a rewrite to serve the webp
images once converted.
Once converted, and the cache is purged, the images are served as webp and you can check this by inspecting the source and checking the image mime-type.
Please make sore to check our article and let me know if you have any other questions.
Thanks!