It works offline.
• Word Lens: Just point your camera to a sign or text and the Translate app will instantly translate the text, even without Internet/data connection. Currently available in: English ↔ French, German, Italian, Portuguese, Russian, Spanish.
(From https://play.google.com/store/apps/details?id=com.google.and... )
I doubt this implies that the Google translation engine has been ported to work offline.
[1] http://googletranslate.blogspot.com/2013/03/the-worlds-langu...