It affects all projectile entities (e.g. arrows, fireballs, potions) but not other entities such as tnt or mobs.  Every ~20 ticks it updates the position to where it's supposed to be, and if the entity changes state (such as an arrow's inGround tag becoming true) it updates immediately.  It also affects other entities properly even while not being rendered in the correct location.  For the Power[0,1,2] data, the projectile renders with a trajectory that curves towards the negative X, Y, and Z directions but actually travels and impacts as it should.

A video's worth a thousand pictures, so here's a gif showing the bug in action (sorry for gfycat, couldn't directly upload because it's 284 MB, and file size is limited at 10 MB)

Demonstration (gfycat)

In case you need more details, this is using a convoluted raycasting system I set up.  The projectiles are being fired in the direction of an invisible armorstand summoned 0.1 blocks in front of the player by setting the Motion or Power tags equal to the difference between the coordinates of the armorstand and the player, stored as a scoreboard value, via /data merge.  When I summon them regularly with a /summon command such as /summon minecraft:fireball ~ ~ ~ {direction:[0.0,0.0,0.0],power:[0.123,-0.123,0.246]} they render just fine.  As far as I can tell, it only occurs with /data merge.  I'm not sure if it only affects /data merge with the "from" argument, or all /data merge commands.