Once you've written a program for your PIC you can load the program into the simulator. The simulator will have commands or sometimes a graphical user interface that allows you do things like reset, single step to the next instruction, set a break point and let the program run up to that point and so on. So if you single step your program you can see which bits changed where. I've found that a simulator can save a lot of time. I use the Parallax PSIM simulator so I can't speak for the Microchip simulator.
Emulators also provide reset, single step, break points etc.
Emulators are quite expensive but can really save time if you do a lot of program development. You can download each section as you need it. Alternatively, you can get all of them on their CD-ROM plus a lot of other stuff.