>Normal execution of the program thereafter disregards the DATA line??

Yes. The DATA statement simply presets the content of EEPROM at PROGRAM TIME - ie when you burn the PIC in your programmer. The DATA statement is not actually an 'executable' piece of code. It carries no program overhead. It is simply a directive to place values into EEPROM when the PIC is programmed. Thereafter, the content of EEPROM can be read (with the READ command) and altered (with the WRITE command) as often as you want during program execution. So to recap, DATA presets the EEPROM to an initial value at PROGRAM TIME - and at no other time thereafter (unless you reprogram the PIC in your programmer when the value will revert back to that specified by the DATA statement - unless of course you have a clever programmer in which you can specify if the EEPROM contents are to be programmed or not).

>>So is each LOCATION one 8-bit byte long?

Yes.

>>If so, how can you store 16 bit words??

You split the word into highbyte and lowbyte and use two EEPROM locations.