Andrew Cunningham, writing for Ars Technica, got Apple on the record about the T1 chip and what it does for security and the Touch Bar:

At any rate, the T1 is an interesting chip that does much more than support Touch ID and Apple Pay. Apple tells us that it has a built-in image signal processor (ISP) related to the ones Apple uses in iPhone and iPad SoCs, something which Troughton-Smith suggests could protect the camera from malware hijacking. And its Secure Enclave handles the encryption and storage of fingerprint data and protects it from the rest of the operating system and its apps, much as it does in iOS.

When you interact with the Touch Bar, Apple tells us that the majority of the processing is being done by the Intel CPU, although the T1 also appears to do some processing in specific situations for security’s sake, as when Apple Pay is used. But to keep the Touch Bar from counting toward the number of external monitors you can use (Intel’s GPUs support a total of three separate displays, AMD’s support six), the T1 is used to drive the Touch Bar’s screen. From what Apple told me, it sounds like the image you’re seeing is actually being drawn by the main system GPU but is being output to the display by T1, not unlike the way other hybrid graphics implementations work.

Between A-series chips, the W1, and the T1, Apple’s most fascinating work is happening in the custom silicon space. The whole T1-Touch Bar deal is extremely intriguing.