It splits the editor into a UI that is run locally, and a server that does the heavy lifting on the remote machine. Conceptually it’s very similar to Jupiter, where you have a user facing front end with the UI run on JavaScript and rendered by your browser, and a python kernel backend, and the two communicate over pipes that can be run over the internet.
What it effectively means for VSCode is that you get a more seamless experience than I experienced with Pycharm remote development.
Big positives are how it integrates with the rest of the IDE so go to definition, debug cell, and data explorer just work.
Some negatives are a possibly onerous setup if not already using VSCode as your IDE (to get some of the IDE-like stuff to work), and how there isn’t exact parity on hot keys so muscle memory fails you occasionally.