You need to have a functional renderer for TeX (LaTeX) notations - usually people need to check permissions of executable mimetex.xxx file (depending on environment - usually mimetex.xxx needs to have 755 permission) in folder filter/tex to see at least mimetex syntax. To see some more advanced LaTeX you can for example install a full distribution of Latex - for example TexLive - together with ImageMagick or GhostScript and set correct paths for these executable binaries in administration screen of Tex filter. Or you can install for example MathJax and let it render mathematical notations with theme files... see some other posts from these forums.
Filters are not used inside editor content area so seeing only LaTeX syntax between tokens in editor is normal behaviour. It would be possible to create a simple plugin to tinymce to render Tex filter syntax as images (using tex filter files or some other renderer) in editor content area and again change those image tags to tex filter syntax while saving content but that option is not available in core moodle.