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  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
    .......
    }
  1. While app/etc/modules completely disabled module