Yes it does fallback. There are two situations where it does so 1. The sender cannot connect to the imessage server 2. The receiver does not connect to the ime

Yes it does fallback. There are two situations where it does so 1. The sender cannot connect to the imessage server 2. The receiver does not connect to the imessage server, on any of the devices registered to receive at that particular address. I know both methods happen since I didn't used to have data and I would receive SMSs when someone sent me an imessage and I was out and about.