They are called "proxies". It's not a system PS uses for it's main editor, although that can be used in the Multicam editor.
PS uses a different system - Playback Optimistation. That can generate half res files using a less complex codec, allowing smooth playback. This results in the "render bars you see over the timeline.
(As Saby has posted, it can be achieved manually, but it's a long-winded manual process that is error prone,)