1. `System > Configuration > Advanced > Disable` Modules Output will not actually disable that module. It will, as the name suggest, disable modules output.

When you look at 

    abstract class Mage_Core_Block_Abstract

In

 

    

        final public function toHtml()
                {
                    Mage::dispatchEvent('core_block_abstract_to_html_before', array('block' => $this));
                    if (Mage::getStoreConfig('advanced/modules_disable_output/' . $this->getModuleName())) {
                        return '';
                    } 
    
    // It is checking If its in disabled mode then just return blank output
        .......
        }

2. While `app/etc/modules` completely disabled module