Resizing bones using envelope, how does it affect them?

HI Monica, 

The size of the envelopes will affect the deformation ONLY if you tell Blender to use those envelopes. Otherwise it is purely visual (but distracting if I might say).

There are 2 ways that Blender can use those envelopes.  

1. It will use them straight up as the deformation envelope. When you enable envelope weights on the armature modifier.

2. It will convert the envelope into a vertex group.

I hope that makes sense.  Most of the time you might use the second way.  The first way isn't very flexible.