Assuming that you have a standard setup, my understanding is that first it will look in your project's templates directory. From their it will look through the template directories of any app in INSTALLED_APPS, starting with the first one. At any point that it finds a matching template it will use it and stop looking. For a more thorough discussion of that look here:
https://docs.djangoproject.com/en/dev/ref/templates/api/#loader-types, specifically at the section about the app_directories loader.