I can't tell you what a negative feedback loop does, but I can tell you about what it sounds like. My vibrolux was designed by Bruce Zinky to sound raw and overdrive ealy, and one of the main tweaks was to remove the negative feedback loop.
I needed more headroom, so I had one installed, and made it switchable. With the loop out, the amp crunches up earlier, and has a slightly more present, raw tone through the mids and highs. With it in, the amp stays cleaner longer, and sounds a bit more restrained. It's a very cool mod.