Yes,
Loopback changes the way that GPOs are processed.
Normally when the computer boots up it will process any GPOs that are linked
to the OU ( well, we could also say container but let's just focus on the
OUs for now ) in which the computer account object directly resides. You
are then prompted for a user name and password and domain. So, you supply
your user name and password. At that moment all of the GPOs that are linked
to the OU in which your user account object directly resides are processed.
This is all assuming the default behavior ( with the Authenticated Users
group remaining in use ). And the key is that when the computer boots up
only settings that are configured in the Computer Configuration area are
applied and when the user logs on only the settings that are configured in
the User Configuration area are applied.
Now, what Loopback does - and know that there are two types: Merge and
Replace - is changes this processing.
HTH,
Cary