It is in layers, and on most games the black is on top, and thus gets scratched off first, which is why most Atari games can be touched up really well using only a black sharpie.
I am almost certain they vinyl the cab and then screened it. (Or more specifically the side pieces of wood). If it was the other way around then there would be unapplied pieces of that vinyl floating around, along with games that had poorly applied art, I have neither seen, nor heard of either.