If a Mac is reinstalled by booting in to the recovery partition, and the Mac came with El Capitan but was upgraded to Sierra via wifi, what os will the Mac have after reinstalling via recover mode?
Found the answer to my own question:
The simple answer is, whenever you perform a major OS X upgrade, the Recovery HD partition is also upgraded to the same version of OS X. So, an upgrade from Lion to Mountain Lion will result in a Recovery HD linked to OS X Mountain Lion.
Coming from a windows background, this was too good to be true.
I wanted to check it out myself. So I thought the upgrades are retained in the recovery partition. So I went to a local coffee shop (with slow internet), wiped my disc, and began reinstalling. Indeed the the installer bootstrapper was the latest Sierra version. But it took me more than four hours. Why did it take so long to re-install? Fortunately the installer let's you peek in to the "activity log", and I found that despite the claims in the other answers to this question, the installer does actually end up downloading a very large amount of data from apple servers. It calls them chunks and I watched as all 400+ of them downloaded one by one. Mind you, this happened a few days after the recover partition was supposedly given the latest updates.