What is it for .

Reason I'm asking is my understanding is if buying an aftermarket servo with only three wires stock electronics (esc/receiver) will need to be replaced also.

I also run some 1/10th scale that has a battery slot (3rd channel) on the receiver that a transponder can be connected too.

How do you connect a transponder to a stock electronics mini-t?

Do I splice into the battery (hot) and negative wires going to the servo or motor or neither?

Yes if You go to standard servo 3 wire You have to replace the rec'v speed control. Some of the electronics of the 4 wire servo are in the rec'v.
You can splice the transponder into the battery side not the motor side.