A line like that basically says that in the current point of the sprite needs to have the same color as the color of the specified texture in the specified uv coordinate.
That code passed as uv parameter changes the point where to read the color of the texture, if you use the usual UV the result will be normal, but if you program the shader so that it picks one uv lower, then the next one higher etc you will have a distorted wavy result, use TIME and you will have a moving wavy result.
The fragment shader doesn't affect the shape of the sprite, If you notice the sprite remains a rect, it doesn't become a wave, the wave movement is an illusion created by "moving" the texture inside the rectangular sprite(=by changing the uv).
If you wanted to actually affect the shape of a mesh(i don't know about the sprite) to make it like a wave you need to change the position of the VERTEX in the vertex shader.