It turns out the offline documents are stored in the HTML5 FileSystem.
The Chrome FileSystem storage is located here on my Windows 7 machine:
C:\Users\<username>\AppData\Local\Google\Chrome\User Data\Default\File System
I added a number of large images to a document with the Chrome “Offline Docs” enabled and was able to see the FileSystem storage directory grow appropriately.
I then used the HTML5 FileSystem Explorer extension for Chrome to view the file structure of an offline document and was able to confirm that the images were, indeed being retrieved from the HTML5 FileSystem when Chrome was offline. See screenshot:
