The Disable feature under an individual app screen in Apps settings prevents the app from being used, effectively removing it but in a way that it can be enabled again later without re-installing.
This functionality is sometimes also called "freezing" an app. Before the functionality was added officially to Android there were third-party tools for freezing apps.
When disabled, the app will disappear from your home screen and app drawer, and all other locations. It will in all ways be as if the app is uninstalled, with the only ability to see the app being the list of Apps in Apps settings.
All data stored by the app is preserved, and when re-enabling, the app will remember what it knew previously.
A primary use for this feature is to disable apps that were pre-installed on your device and cannot be uninstalled. Both phone manufacturers and cellular providers install suites of apps on devices that not all users will want or need, and in cases where these apps are part of the system image (their code exists in the system partition of the device) it is not possible to uninstall them.
Thankfully it's becoming more common for larger pre-installed apps to reside in the user partition, allowing them to be uninstalled and their space reclaimed.