It is more a way to keep newbies to screw up their rigs. (They do that enough anyway) (Oh, and to allow you to use the MSDash)
How does it work?
A untouched copy of the entier c: is made into a img file when you run the exploit installer (befor any files are added to it) and placed on one of the xbox partitions.
The exploit files ,that is what makes the softmod work, are then copied to the REAL c:\
So, when the xbox is turned on, it executes the EXPLOITED files on the REAL c:\, and the exploit then loads (mounts) the c:\ img file as c:\.
Why all this work?
Its so when you ftp in and go to c:\ you dont see the real c: (the one with the exploit files) You see whats in the img file and you cant delete anything that would make the exploit to fail to boot.
Nifty aint it!
I hope i explained it well enough