Robert's answer is not correct. The game does behave slightly differently when it is on and when it is off. Also, the game speed does change how fast tech points are accumulated and how quickly villagers work, both when the game is off and when it is on.

There is a good discussion about how game on/game off behavior works in VV1 in this thread, although in VV2 the productivity of the villagers when the game is on has been adjusted to more closely match game speed.