pg module defines only a few methods that allow to connect to a database and to define "default variables" that override the environment variables used by PostgreSQL.
These "default variables" were designed to allow you to handle general connection parameters without heavy code in your programs. You can prompt the user for a value, put it in the default variable, and forget it, without having to modify your environment. The support for default variables can be disabled by setting the -DNO_DEF_VAR option in the Python Setup file. Methods relative to this are specified by te tag [DV].
All variables are set to None at module initialization, specifying that standard environment variables should be used.
Read the upstream documentation. For corrections, first check the current manual.