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Flecks have their own LOD, and everything is made out of flecks, effectively.
While they're behind a sculpt those flecks don't get rendered. But things like physical paint still needs to be simulated so it knows where the flecks are in the first place.
Powering things off when you know they don't need to be processed lets the engine completely skip those things too. For example, if you have a game with 3 islands but you can only see one of them at a time, you could power off the other two completely and that would let the engine not have to check all the objects to figure out if they can be seen, or the logic needs to be run, etc. etc.