InDesign does not "store" any data for placed images. Everything is a "link" to the original image file and not "embedded" within InDesign.
What happens to placed images in InDesign upon output....
- InDesign references the original image data
- InDesign transforms the original data as necessary to meet the InDesign document. What that means is... if you scale a placed image, the data is scaled. If you rotate a placed image, the data is rotated. Etc.
- InDesign then outputs the data after transformations are applied to meet any output specifications -- i.e. PDF Job Options or printer dialog settings.
Where this becomes problematic.....
If you place a low resolution raster image into InDesign, InDesign uses that low resolution image. It won't create a "better" image. Whatever the original is, that's the only image InDesign can use.
If you place a high resolution raster image into InDesign and then scale it up (enlarge it), you have stretched the resolution. In many instances this will cause quality damage to the enlarged image. It is best to never enlarge an image more than 105% within InDesign itself.
If you place a high or low resolution raster image into InDesign and scale it down you effectively increase the resolution of the image. This does no harm to high resolution images but may make some minute details harder to see. For low resolution images, it may be beneficial to reduce them within InDesign, see here.
If you are scaling raster images within InDesign, it is best to keep an eye on the Effective PPI which can be seen in the Info Panel (window > Info) with the image selected in InDesign. The Effective PPI should always meet the minimum requirement needed for output.
As for why your test prints look poor, it's not really possible to tell without much more information regarding image sizes and resolutions as well as hardware (printer) capabilities. It could be a hardware limitation of your printer, it could be the images themselves, or it could be how you've transformed images within InDesign.