What is open-loop (or closed-loop) mode?
In closed-loop mode, the ECU uses readings from the O2 sensor to determine how to adjust the fuel injector output. It is a self-adjusting mode to help the engine run at a specific air/fuel ratio. It is suggested that the ECU uses this feedback, likely along with other sensors, to adjust other parameters such as ignition timing as well. In open-loop mode, the ECU ignores the O2 sensor readings, and instead, reverts to fixed fuel injector output settings stored in its memory. Since the manufacturer has to use the same fuel map for the stackup of all manufacturing tolerances and operating conditions, these open-loop settings are typically poorly optimized for performance driving.