It goes back to the "User Login Screen" from what I understand. Just so you are not compromised if someone was to come up and press the space bar to get the computer back on. I put my computer to sleep daily and it comes back up on the user login screen because of my password.
Shouldn't, from what I understand. I would try to run it in a scenario if you have a Windows 7 PC and create two users with that particular setting changed, then you can logout or put it to sleep and see what it does.