Low power mode does a number of things to save battery power. It automatically changes some settings to save battery power, disabling automatic fetching of new mail, reducing your screen brightness, and automatically locking the phone and powering off its display more quickly. Apps can detect low power mode is enabled and choose to disable animations and other battery-hungry features, too.
Motion effects and animated wallpapers are also disabled. Background activities and networking are paused to prevent unnecessary power drain in the background. Your iPhone even automatically reduces the performance of its CPU and GPU, which makes it perform a bit slower but saves battery life.