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