Umm... In the Prius, which is a series-parallel "full" hybrid the motor-generators (there are 2) DO replace the transmission. MG2 is direct coupled to the final drive, hence the wheels and to the ring gear of the PSD which is a simple planetary gear set, MG1 is connected to the sun gear, and the engine is connected to the planet carrier.
28% of the engine's torque always goes to MG1, From there the electricity can be sent to MG2 or to the HV battery, the other 72% of the torque goes directly to the wheels. The hybrid vehicle ECU controls the speed and direction difference between the 2 motor-generators by feeding power from one to the other to control the effective gear ratio. At low speeds MG1 spins faster than MG2 to act as low gear, at highway speeds MG1 spins backwards which slows down the engine and acts as an overdrive.
Note that torque is split at a fixed 28/72% but power isn't since power is torque multiplied by RPM, AKA if the wheels are still (stopped) 100% of the power goes to MG1, if MG1 were theoretically still (which never happens with the car moving) 100% goes to the wheels.
In assist "mild" hybrids like those from Honda the motor-generator is separate from the transmission.