All it does is clone the front left/right speakers to the rear. It's for those whom don't have a sound device to encode a true multi channel surround to the speakers. It's very similar to what Dolby Pro Logic II does, nothing ground breaking, but useful if you don't have an AVR that can convert stereo to DPLII.
It would only come into play if you're outputting to optical with no sound card or AVR. If you're using a surround speaker set plugged into your PC, it's pretty much useless, especially since you'd be losing discrete rear channels.
The only difference you probably heard is the rears started sounding louder because they'll always play same as the fronts, whereas a discrete surround setup will only have rear volume when there's...