It is only where cambium tissue from the scion meets cambium from the stock that the tree can grown new wood and bark to cover over the wounds created by grafting. At first, most of the new wood and bark created by the fusion of cambium tissues is located outside the scion-stock boundary. But as the stock and scion continue to grow, new wood is created to cover the cut surface of the stock.
This photo also illustrates how trees work to block the spread of wood decay that results from tree wounding. On the right side of the tree, a new layer of wood has grown since the graft was made. Note the faint brown line that marks a boundary between this new layer and the discolored wood associated with the pruning wound. Trees develop a specialized boundary layer (the brown line) to wall off decay organisms from reaching new wood tissues.
A photo of the inside of a much older bark graft can been seen here.