Not only that, but my Samsung Galaxy S3 and my wife's Note II came with the
native ability to use voice as an entry method for nearly everything,
including texts, Google searches, navigation queries, emails, etc. Anytime
the keyboard pops up to allow text entry, a microphone 'key' is also
included that lets us switch to voice input.
Regarding the OP's question, yes, an Internet connection is necessary to do
the voice to text conversion, at least on the two phones I mentioned above.
I haven't checked to see how the 3rd party apps do it.
--
Paul Miner