It definitely downclocks the chip, but it also does some other stuff like capping the frame rate on the display, which (to me, ymmv) goes a long way towards making the phone "feel slower".

My (teenaged) kids frequently let their phones go into low battery and then run in power saving mode for hours, when one of them hands me their phones it's super jarring and feels awful to use coming from my 120hz phone haha.