Wicked's explanation is the correct "theory of operation." But, does it actually work the way it is supposed to? Anytime you dump something foriegn into the intake, there will be an adverse effect somewhere.
While dumping burned exhaust gasses back into the intake may cool off the combustion chambers for less emmissions, it does effect combustion. An the theory of advancing timing to compensate leaves a lot to be desired. Timing advance to gain power is over-rated as there is not that much gain. Gasoline will only tolerate so much advance. Also, an internal combustion engine works of off expanding heat. If you lower the heat of combustion......................
EGR works at steady state conditions, like when the engine is cruising. At other speeds, such as in town, the EGR does little.
When I occasionally visit relatives that live over 300 miles from where I live, I disconnect the DPFE sensor. I get a CEL, but ignore it for the trip. The truck is a 1996 F150, 302 engine. By disconnecting the sensor, mileage increases by 2 mpg, from 17 to 19. I do not notice any power gain with the ass dyno. The miles driven are freeway miles, so I can set cruise, and forget it.
So, while the theory looks good, it doesn't always work as stated. Nothing is "definite."
shady