So I spotted the same problem on 6th May 2016 and sent a PR (which was merged) to update the description shown in VS Code to "Detect mistakes as you type and suggest fixes using a web service"
This was an oversight by me in a recent update - however -I've resolved it and with any luck made the statement even more visible for the users/anyone who does an update.
PR https://github.com/Microsoft/vscode-spell-check/pull/30
But it seems this was reverted in a more recent commit.
#letTheConspiracyTheoriesBegin