VG1 is a voltage source.
If you consider the voltage drop across R1 + T1 + R2 + VG2.
T1 is changing with respect to the carrier
VG2 is changing with respect to the modulation.
If we remove the carrier and look at the DC level (fix T1's current)
Lest say the voltage is 10V. R1=10 ohms R2=1 ohm VG2=1Vpp and T1=4 ohms
10V-1V=9V 9/(10+1+4)=0.6A thus VR1=6V, VR2=0.6V Vce=2.4V (output voltage = 0.6+2.4+1V = 4V with respect to ground)
now the 180 degrees out of phase for the modulation.
10V+1V=11V 10/(10+1+4)=0.67A thus VR1=6.7V, VR2=0.67V Vce=3.63V (output voltage = 0.67+3.63-1V= 3.3V with respect to ground)
All that is happening is that you are changing the emitter current by changing the emitter voltage.
This effects the amplified carrier signal gain. That's modulation !