When we move around our Scene using Matrix transformations such as glTranslatef and glRotatef, are we modifying our vertices coordinates or are we moving through our scene as if we had a flying camera?
Both, and neither. It all depends on how you look at it. Technically, you are affecting the points of the current world, so the points you draw afterwards are transformed from their raw coordinates given. The effect can then be interpreted either way, if you do this for the whole scene, yes, you are moving the whole world around the camera, but also remember that it looks exactly the same as moving the camera around the world.