What about both?
Pseudo infinite mode generates the world as many separate connecting worlds that when you place something, update all the worlds!
Confused? I have a poorly drawn ms paint picture to demonstrate how it works!
Big Image
Well it doesn't update all the worlds at the same time, (There's an infinite amount of them). It only updates the ones in the 4 directions you can travel along with the one you are in. (N, S, E, W) If you get to the edge of the north world, you end up on the south edge. If you are on the east side, you end up on the west. Though it would essentially be like having 5 worlds loaded instead of 1, It would be like you are on a planet!