NOTE: I know this is an older post, but just for clarity, I wanted to reply.
Yes, it does it automatically.
For the curious, how it works is this:
On start-up of the game (ie. while the splash screen is up) if it determines any of the games XML files have been changed from what was used when the data.zip file was created (or the data.zip file is missing), it will load in all the XML and recreate the data.zip. Otherwise it just loads in the straight binary data from data.zip, which takes a matter of seconds rather than about 4 minutes to load all the XML files individually.
