The second way that you can use Loopback Policy Processing is called Replace Mode. There is a big difference in the way that Replace Mode works. When a computer boots up, it will run through its normal processing cycle, taking any GPOs that are linked to the computer's OU and putting those Computer Configuration settings into place. However, once it comes time for a user to log into this computer, everything changes. GPOs that are linked to the user and would normally get put into place upon user login are completely ignored!
Instead of user settings getting put into place for the user, the computer becomes the user. Rather than looking for GPO settings that are linked to the user account, the computer will reprocess through the GPOs that are linked to the computer account, and it will then process and apply all of the User Configuration settings that are inside those GPOs. In this way, you can determine what User Configuration settings will be applied to all user accounts who log into any computers where you have this loopback processing enabled.
If you are interested in utilizing Group Policy Loopback Processing to make sure that all users receive the same policy settings when logging into their RDS virtual environments, Replace Mode is usually the way to go. This would cause users to have different experiences whether they are logging into their desktop computer, or their RDS session. If, on the other hand, you want a conglomeration of both settings to exist inside their RDS sessions (with user settings inside the loopback policy getting priority), use Merge Mode.