I assume you mean the difference where the encoder loop is returned to the trajectory planner and main controller rather than the final drive etc.
In this type, the controller is aware of what the servo's performance and actions are, as opposed to the type of control such as Mach that hands the motion control over to the drive where the encoder is returned to.
There are many advantages to the true closed loop, one features is electronic gearing and true synchronized threading for e.g., Another is if you initiate an E-stop and turn off the drives, you could conceivably move the motors/axis manually etc and on power up, the new position would be known.
and the control would not require re-referencing, these are just a couple.
Al.