tar extraction also automatically decompresses

Your tar implementation, likely the GNU one, is detecting the file passed as a parameter is compressed.

The mostly used tar implementations these days, GNU tar and busybox ones, are looking to the first bytes of the file, a.k.a. magic number, to figure out if it is compressed and the compression algorithm to use.

The tar implementations found on commercial Unixes that are based on the original AT&T code do not support the -z flag in the first place. One notable exception is Solaris 11 tar where this extension has been added, including the ability to detect the file format.