covariance estimate in function sem (Lavaan)

Dear R users,
I have a hard time interpreting the covariances in the parameter estimates
output (standardized), even in the example documented (PoliticalDemocracy).
Can anyone tell me if the estimated covariances are residual covariances
(unexplained by the model), or the covariances of the observable variables?

I haved checked the data and it does not look like the covariances of the
observable variables, however when I tried to find out using simulated data
( with correlated residuals) the estimates did not seem to be the covariance
of the residuals either (much much underestimated). Can anyone help?