After the engine performs calculations to project the texture onto Polygons, the texture pixels are transformed into texels. Then the engine renders the scene, and at that point it transforms those texels into screen pixels.
The distinction between texels and pixels is important in defining how the engine transforms textures. First they're texture pixels, then they're texels, then they're finally screen pixels.
- Figuring out Textel Density An excellent resource by Leonardo Iezzi showing examples and practices of setting texel density in different scenarios.
- Question regarding tiling textures/texel density on the Polycount Forum