(conj collection item) adds item to collection. To do that, it needs to realize collection. (I'll explain why below.) So the recursive call happens immediately, rather than being deferred.
(cons item collection) creates a sequence which begins with item, followed by everything in collection. Significantly, it doesn't need to realize collection. So the recursive call will be deferred (because of using lazy-seq) until somebody tries to get the tail of the resulting sequence.
The following is how it works internally:
cons actually returns a clojure.lang.Cons object, which is what lazy sequences are made of. conj returns the same type of collection which you pass it (whether that is a list, vector, or whatever else). conj does this using a polymorphic Java method call on the collection itself. (See line 524 of clojure/src/jvm/clojure/lang/RT.java.)
What happens w