Yes, from what I remember of what Tom told me, the damp tissue shrinks as it dries, tightening. I think the dope stuff is mixed with the water?
You can also get a type of heat shrinking tissue these days, which you glue with PVA to the ribs etc, and then very gently heat (hairdrier, or holding an iron close) and that shrinks it. Tom used both, I think he said the heat stuff worked best over larger flatter areas, than the little fiddly bits... But less fumy and smelly than dope and water... Can't remember the name, but I must still have an old cataolgue knocking about at home, I'll look it up.