When turned off it overrides the channel's loop circuitry. When turned on, even if there are not effects in the loop you'll notice a slight compression deriving from the tube buffer of the loop (so slight that you'll hardly notice it playing with it for the first time).
Actually a friend of mine engages the send 2 button all the time regardless if there are effects present because he likes the feel in his hand.
But when it's turned off I suppose it completely bypasses the loop circuit.