You have a set up that is termed nowadays conventional or sometimes traditional (meaning simply before the command era). You attach the power and ground to the track and regulate the speed by increasing or decresing voltage.
In command mode, a Legacy-equipped engine beomes a smart engine. You have to have a Legacy command set which includes a base and a remote. When you attach the base between the transformer and the track, the base sets out a signal that tells the engine that it will respond to your commands through the remote. In addition, at all times you have applied fixed voltage (recommended 18 volts) to the track.......but the engine only uses the voltage based on the speed you desire through the remote.
To make it a little more confusing......Lionel started this command system around 1995 and called it TMCC......TrainMaster Command Control...........Legacy is the updated version from around 2004-05.
Hope this helps.......I am not an electrical person.....if someone can say it better, please do....
Check out the Lionel 2021 Big Book Catalog, page 209, for a description of the components.
Peter